Re: <nettime> central Banks & price stability (was: notes from the DIEM25

[Patrice Riemens <patrice@xs4all.nl>]

On 2016-03-28 02:37, Alexander Karschnia wrote:

> An important topic that came up in the discussions here was the
> economic question. How to combine the economic with the democratic
> question. The latest books of the Berlin-based theorist Joseph Vogl is
> called "The Sovereignity-effect". It deals with the institution of
> central banks.  In his genealogy of central banks it is striking to
> see how they are deliberately designed to be intransparent and
> undemocratic. How they have become a sovereign of their own. Vogl
> tells their fascinating story, focussing on the Bank of England (as
> opponent to the French revolutionary government), and the founding of
> the Fed 100 years ago -- but it really becomes explosive when he
> describes how the German Bundesbank was founded after the war and how
> the ECB was modelled after it. The peculiar cirumstances about the
> foundation of the German Bundesbank is that it was founded before any
> other political institution came into existance in Western Germany: it
> existed prior to the government or parliament! This tells a lot about
> how it is conceived: it is intended to be isolated or "immunised" from
> the democratic sovereign. It is really worthwhile to compare the
> description of the eurogroup by Varoufakis with the analysis of Vogl:
> informal networks that form exclaves or islands within the
> governments, a club of central bankers who become the highest
> authority in all question related to money. With no democratic mandate
> whatsover!
> 
> Now in this context it is interesting to re-read Foucaults lecture on
> the "birth of bio-politics": in depth he describes the rise of
> neoliberalism with respect to German and Austrian liberals, the
> so-called "Ordoliberals" from Freiburg. If we want to discuss
> neoliberalism, we should start with them, for example Hayek who
> inspired the anarcho-capitalists from the US.  (It was Hayek after all
> who came up with the idea of a "denationalization of money".) If we
> want to discuss the "deficit of democracy" in Europe, we have to
> discuss how it is a structural requirement of the working of the ECB.
> Democracy in Europe has been re-defined after WW II in this way: as
> "market-confirm democracy". This term is younger, it is product of the
> "ongoing crisis. It was put in Merkel's mouth by her opponent and now
> "partner from the social-democrats. But it is much older -- from 1948:
> "the founding of the Bundesbank that put "price-stability" as highest
> "value: much higher than the unstable will of the people. If we want
> "to discuss the situation in > Europe, we should start here, looking
> "back on 1948. Since the EZB > started working in 1998, it is 1948 all
> "over Europe. It is the > realization and radicalization of the "ideal
> "of a market liberated > from politics by politics". If it continues
> "to work this way, maybe > soon it will be 1933.

Pace the middle classes' paranoia about inflation (esp, but not only, in
Germany), the principal objective of central banks' price stability
policies is to keep wages in check.

As wages, in a social market/ ordoliberal economy, are indexed to the
(usually upward) evolution of (consumer) price(s) - which indexes are
variously manipulated by the power that be, but that's a different story 
- there is every reason, from the side of the owners of the means of
  production, to keep _price inflation_ as low as possible. The obsession
with price stability, which was in the DNA of the Bundesbank, and was
transmitted to the European Central Bank, led to completely losing
(over)sight of a completely different type of inflation: assets (-prices)
inflation, one of the primary causes of ever increasing economic - and
hence social, and political - inequality.

Cheerio, p+5D!

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