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The shortage of liquidity in September / October 2008 was organized

2 billion dollars is the sum of excess reserves of U.S. banks as a whole in July 2008 to cover more than 7000 billion dollars of deposits (M2), slightly more than $ 6 per capita. To give a clearer picture even though extremely simplistic, one American had an average of just over $ 23,000 in the bank in July 2008 but his bank had just $ 6 in cash available to meet withdrawal requests. On 14 September 2008 On the eve of the announcement of the bankruptcy of Lehman Brother lack of buyer, the banks of the eurozone as a whole had less than 15 billion euros of excess reserves to cover just under 8000 billion in deposits (M2) . A few days earlier, these excess reserves were nonexistent. These figures have a very specific meaning: The European and U.S. banks had almost no cash to weather the financial storm that would befall the world.

explain the meaning of the term "reserves surplus "so that we can understand how the banking situation was structurally fragile. Legally, banks are obliged to maintain a certain ratio of cash to cover the deposits they hold. For example, in the Eurozone, so in France, banks are required by law to maintain the cash equivalent of 2% of the amount deposited on current account and savings account with a term of less than two years. Each bank must deposit this money in an interest bearing account within the European central bank. On 14 September, the so-called 'reserve requirements "Amounted to 214 billion euro. In case of problems, each bank can draw on those reserves to meet withdrawals or transfers to other banks. However, they are required to have on average over a period of one month, at least 2% cash deposited within the ECB. If the bank fails to meet this obligation, it can simply be declared bankrupt. These "reserves" do not function as being a safety cushion. They function as stop the potential money creation by banks. With 2% reserve requirement, each euro base currency can potentially be converted to 50 euros credit money (ie the currency of our bank accounts). If this ratio was 1%, this could go up to 100 euros. The real cash cushion, are excess reserves. Now, as we have seen, they are virtually nonexistent.

So why these cash reserves were they too weak on the eve of a terrible crisis of liquidity. A superficial analysis would push us to say that bankers, greedy to pay every cent of their excess reserves, would recent tender to 0 to maximize their profit at the expense of the very security of the bank. The reality is more complex. While the banks have a financial interest to have very low excess reserves, but another actor as much interest to keep extremely low: the central bank. I created this blog to try to show in many ways the fundamental absurdity of our monetary system. Here we touch, I think one of the key points absurdity of this: if they want to control inflation, central banks should force banks to take risks dementia in terms of liquidity.

Each new euro issued by the European Central Bank will land in a bank account within the central bank. This issue is most often as a loan against collateral. The euro will be an additional excess reserves to a bank and therefore the monetary system as a whole. This additional euro, seemingly innocuous, has immense potential inflationary. It can become up to 50 EUR credit money on our bank accounts. By issuing a writ miserable euro, the ECB takes the risk that the deposits of residents in the euro area increasing from 50 euros. It's the fractional reserve system that allows such a miracle by allowing an even lent euro is up 50 times to different people or business. No need to be Nobel Prize in Economics to understand the following: if a central bank wants to have the upper hand on money creation, it must minimize the banks' excess reserves. It Clearly, if the banks had excess reserves of 500 billion instead of the billions they had before the crisis, the risk of bank money creation would become totally uncontrollable been more important. To have control of money creation, the central bank must ensure that banks have a minimal number of excess reserves, that is to say, ensuring that banks are taking a risk in terms of maximum liquidity. What I am trying to explain a theory is anything but silly. Limiting excess reserves is clearly displayed by the European Central Bank as a prerequisite for effective monetary policy.

In "normal times, banks manage their liquidity problems by paying them. Those with excess reserves lend to those who need cash. These are most often prepared daily. When Lehman Brothers went bankrupt, this type of loan has completely frozen and many banks found themselves short of cash. Cash without a bank is found in the same situation as a man without oxygen, she panics. It will sell its assets to find the cheap liquidity, it will demand repayment of certain loans overnight. In short, the destructive spiral of financial panic. If they had the cash, banks would not panicked that way. It is this lack of cash, lack structural organized manner, being with the monetary system as it currently operates, which is the cause. The violence of the events of September / October 2008 can only be understood if we do not notice the fact that banks had no cash, no safety cushion and that the shortage was a shortage organized.

Central banks have played their role last spring to provide banks the cash they needed to do business. Do they have injected enough cash fast enough? Obviously, I am not able to answer such a question, but the violence and suddenness of the decline suggests not.

We also see that during the period from September 15 to October 9, the strategy in terms of liquidity from the ECB was absolutely chaotic. During this period, the ECB injected and then removed by successive blow to the liquidity the banking system was badly needed to overcome the lack of an interbank market. This indecision is understandable given the exceptionality of the situation but the consequences of these have certainly been very important. Again, a bank without cash is total asphyxia. 20 days of panic are sufficient to cause a crash of the assets and put a large number of firms in difficulty by not renewing the credits, not to mention the investment that could not find financing. Show that during five days, between October 2 and October 6, the ECB could leave the banks with reserves below the minimum reserve even though the world was going through one of its most terrible crises of liquidity is still thinking about a serious professional misconduct. The lesson seems to have been understood since one year, these excess reserves ranged between 100 billion and 300 billion euro without ever falling back to numbers closer to 0.

Praise for Central Banks have been able to throw money at the right time, this is a joke. The real question is how can we accept a monetary system that forces banks to take such risks could cause liquidity the economy as a whole in its fall.

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The Bomb Japan Will it explode?

Japan's public debt approaching 180% of GDP and some analysts predict that the bar of 200% may be taken in the coming years. This represents After nearly 9 times the annual revenue of Japanese government in 2009. Since the explosion of huge real estate and stock market bubbles in the early 90s, especially after the Asian crisis of 1998, the Japanese government has tried to support economic activity going into debt heavily. Before the crisis began, we thought that finally Japanese government would conduct a strategic turning point and began a process. Reducing the risk of deflation and resumption of growth in any case let him think. The crisis hitting Japan is strongly left no choice Nippon THE STATE to resume its old habit. The first change in the history of Japanese democracy is not going to fix the situation. Freshly arrived in power is a new loan of 400 billion euro contemplated by the new government to finance its social policies.

Long a subject of astonishment among Western analysts, the Japanese debt will gradually become a topic of great concern in these times of economic hardship. There are no great mysteries, a failure to pay state almost instantly Japanese sign the death warrant of our clinical system Financial World. This would require reinventing almost every rule with the troubles involved. Such an event would bring the collapse of Lehman Brothers for a very minor detail of history. Yet how can we not worry? Such figures are frightening and it is hard to see what are the loopholes of the Japanese state. For now, the interest on the debt has been limited because, enjoying almost intimate relationship with major Japanese banks, the state could Nippon debt to astronomical sums at rates of less than 1%, sometimes close 0. But they were to increase even if only 1 or 2%, the situation could turn red very quickly because 1% to 220% of GDP is 2.2% of GDP to pay more to creditors. In short, the risk of panic worsens almost daily.

To avoid a catastrophic outcome, there are two solutions: either increase the nominal tax revenues, or monetize the debt.

Let us first solution: the nominal increase in tax revenues. To do this, there are three economic phenomena: growth, inflation and rising taxes. These three phenomena can obviously be combined to improve the finances of Japan. Higher taxes hardly seems possible given the current economic difficulties of the Japanese economy. With a savings rate of only 2%, higher taxes would be charged almost immediately consumption, automatically worsen the situation in the short-term and make it more credible fears of default. Moreover, it would be a dangerous decision for a government from being elected.

A rapid return to strong growth appears to be an unlikely scenario. Even before This crisis, Japan had just experienced more than 15 years of economic lethargy, the famous "lost decades". Following the runaway speculative 80s, households, companies and Japanese banks found themselves overburdened with assets worth more than not much. At the top of the bubble, the Nikkei stood at 40 000 points in the late 80s when he no longer worth it revolves around 10 000 points today. In the early 90's, the land of Tokyo was valued at the same price as the entire state of California. If Japan is not broke Depression is due to Keynesian policies, and Japanese mercantilist state. As we have seen, the State was heavily indebted to, among other finance large public works resulting in a "concrete" of the country. By keeping interest rates near 0% for almost 15 years, the Japanese central bank has made Japan a source of credit "cheap" for the world. This had the obvious effect of lowering the value of the yen and boost Japanese exports. The Central Bank in raising strong foreign exchange reserves has also pushed the yen down. Japan was thus able to preserve strong trade surpluses and focus its growth on external trade. The sharp revaluation of the yen with the crisis and the urgent need to cope with this monstrous debt are many analysts feel that this strategy is breathless. Nominal GDP is now at the same level as 1994 and it is unclear how, with its aging population, Japan could reverse this trend.

remains inflation. Historically, it was the most expedient commonly used to reduce domestic public debt. Indeed, as prices grow, the nominal amount of tax increases in a fairly close, thereby reducing the real burden of debt repayment. If the price level increases from 100%, the debt is then halved in real terms. But contrary to received ideas, inflation can not be decreed. The famous printing money is sometimes not enough to raise the price level. Japan must fight for over ten years to avoid falling into deflation. Policies known as "quantitative easing" implemented by the Bank of Japan since the early 2000s there have done nothing, prices do not increase. The "quantitative easing "Consists of massive redemption of government bonds by issuing fresh money (ie by printing money market). This action results in a substantial increase in bank reserve money.

The following table shows the reserves of Japanese banks. They depend directly injections or withdrawal of money from central banks

Despite the violent changes in surplus bank reserves and hence the monetary base, the money has remained surprisingly stable during this same period increased at a much too small to cause a significant increase in prices. We can see three distinct periods in the diagram above. A period of intense expansion of bank reserves to avoid deflation. In April 2006, Japanese authorities decided to backtrack to the ineffectiveness of their strategy and take the money they had issued. Since the beginning of the subprime crisis in mid-2007, the Japanese central bank has resumed its expansionist policy to avoid a liquidity crisis among Japanese banks. But reading the reports of the Bank of Japan all seem to realize that within the Japanese economy now issue new money is not an effective way to cause a price increase. Who could say they did not go quite strong?! Between 2000 and 2005, bank reserves were increased by 6. The failure of "quantitative easing" is consumed.

The reason for this failure is simple: if the banks do not lend the accumulated reserves, they remain inactive, have not the least impact on prices. In general, under the current monetary system, the amounts outstanding e-money depends on the willingness of banks to lend and the willingness of households, businesses and state. The more prepared, more money in circulation is growing. In the opposite direction, when the loans decrease, the currency in circulation tends to decrease. The central bank may do whatever she wants, if banks stop lending, the currency in circulation will melt and that means strong deflationary pressures. We must understand that this link perverse and contingent between money and credit is essentially absurd operation of our monetary system described in earlier post.

Thus, there is inflation, under the current system must be that households, businesses, government, financial institutions or heavily indebted. Look at the evolution of various economic leverage in Japan for 40 years.

It is clear since the late 90's Japanese private sector debt melting like snow in sunshine. During this same time, the Japanese government debt has grown exponentially. The heavy debt of the Japanese government has compensated the private sector deleveraging. Without this compensation, it is a terrible deflation would hit Japan.

Despite the private sector debt, overall debt levels remain high. Who is going to be able to go into debt to boost inflation? We are looking for a way to reduce Japan's public debt, a debt Supplementary Japanese government is not an option. Expect private sector debt large enough to raise prices is very unlikely given the current situation. Furthermore, additional debt from the private sector is not desirable. It is the indebtedness of the private sector qi is the source of the two lost decades of the 90s and 2000. In short, high inflation is not at all feasible.

short, our three solutions are not relevant in the Japanese case.

A sort of "balance of terror" should probably prevail in Japanese financial circles. You know the famous balance of terror between China and the United States. In Japan, both major players in this delicate balance are the Japanese financial institutions and the Japanese government. For 15 years, the first finance the public debt of the state of interest rates close to 0. With this, the interest payable each year is limited. Obviously, having recourse to debt so cheap is largely responsible for these excesses. Most of the Japanese public debt, contrary to what one sees in the U.S. or Europe, is in the hands of Japanese institutions. The views of the importance of public debt, presumably without access to the figures that a very large part of the balance sheet consists of Japanese government bonds. This puts the Japanese banks in a very complicated situation. Indeed, if they start to deny the bonds issued by the government, interest rates will automatically rise thereby lowering the price of bonds held by Japanese institutions. The consequence is obvious: monumental loss and solvency crisis for Japanese banks. Loans from the central bank there feraientt nothing since it would not a liquidity problem but a solvency problem (liabilities exceed assets). In short, only injections of capital from the state could save banks. But let us remember that the only source of the state is borrowing from banks. One could imagine the Chinese or American banks come swallow Japanese banks to prevent a stampede, but it would be national issues that would be a hindrance.

sum, banks are in a hopeless situation. Although the Japanese government appears increasingly less creditworthy, they can not refuse to buy newly issued bonds plus just signed their death warrant. A sort of financial tragedy of modern times was born from the explosion of a speculative bubble and an unhealthy situation of consanguinity between the banks and the state. The status quo can it last? The fact that the interest payable for the Japanese government are very low can lead us to say why not. The capital payment of old outstanding debts is financed by issuing new bonds. In the absence of interest and with zero inflation, this scenario is theoretically possible. Government debt held by banks would in this perspective an asset to the image of a land whose price will not fluctuate over time.

The balance is fragile. If banks decide to stop funding the free state spending Japanese, the building is very likely to implode. The Japanese government has the duty to pay attention to the sensibilities of the Japanese financial sector. Even if the rational point of view, caution should prevail on both sides, it is well known that rationality is not always the strong man. The situation can only be extremely stretched between the Japanese government and financial institutions. Given the excess with each spark could explode the bomb in Japan. New spending of the first alternative government could emerge as the drop of water that broke the camel's back. The bond rate began to rise and the CDS (insurance on the risk of default, an indicator that, in my opinion should be taken lightly) have soared in recent weeks. The risk exists Financial Apocalypse. Let us remember that the crisis of the 30s has had two major phases. It began with the explosion of speculative bubbles in the U.S., but the bottom of the hole was actually achieved when the financial systems in Austria and Germany (the two biggest losers of the Great War) have collapsed causing the kind of economic Apocalypse we believe impossible today "because we understand better the economy ". Even if the risk is probably low or very low. The objective of economic policy should be silent to avoid making this sort of outcome. Because basically, once reached such levels of production, only the stability and income distribution really matter.

In a future post, I will try to see how the monetization of the debt until reserves reach nearly full could be a useful outcome for the Japanese state.

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reserves? What reservations? "

In the long list of concepts which the name is extremely misleading, that of "bank reserves" would have a prominent place. When one uses the word "reservation" for an individual, household, business or even an animal, it means that we have set aside to cope in the future to potential hard times. The mechanism is absolutely different for banks.

Banks have a legal obligation in the euro area to maintain the equivalent of 2% of their deposits and savings in reserve at the European Central Bank. For example, a bank that would be 1 billion euros of deposits should maintain 20 million euro in central bank reserves. All that the bank has on deposit at the central bank or in its coffers in addition to these 20 million represents its excess reserves. To maximize their profit, most of the time, the vast majority of banks minimize their reserves surplus. Suppose our imaginary bank has 1 billion and 21 million deposit reserves. 20 million would represent the minimum legal reserves and $ 1 million surplus. Suppose that depositors decide to withdraw $ 5 million. The bank had deposits of 995 million and 16 million reserve. The reserve ratio increase to 1.6% or below the legal minimum. The bank, if it does not find immediate funds to be deposited at the central bank is illegal.

We can see the inconsistency of the term "reserves." The bank keeps money aside that she can not touch any loss or withdrawal under threat of massive illegal. It's like if you were asked to keep aside 100 euros you could never touch. Can we call them "reservations"? What good are money that can be used for?

In reality, these "reserves" are not meant to be reserves. They are simply a tool of monetary policy. More reserves are low, more banks can create money. Plus they are stronger, the central bank control increased the money supply in circulation. Reserve requirement rate depends in theory the bank multiplier. In theory, if the minimum reserve is 10%, 1 euro issued by central bank may turn into an amount between EUR 0 and EUR 10. If it is 2%, between EUR 0 and EUR 50. If it is 0%, 0 euro and euro infinity.

Some countries like the United Kingdom and Canada have simply abolished the legal requirement of reserves. United States, if the legal minimums still exist officially, they have effectively disappeared. By law, banks must keep in reserve 10% of their deposits (current account) and 0% of time deposits (savings). Yet in recent decades, the funds deposited on current account have evaporated and been transferred to "false" savings accounts. Current accounts represent only a fraction of the money supply. The relative share of the savings accounts has increased greatly cons. In fact, Americans deposited on current account savings account disguised as allowing banks to circumvent the regulation. We can therefore say that the minimum statutory reserves have been also abolished in the United States by the passivity of the legislators on this issue.

Faced with this type of circumvention, the central bank has decided to impose a legal minimum reserve of 2% for both savings accounts and current accounts. Thus, there is no incentive to disguise the current account savings accounts. But what about those meager reserves? 160 small billion to cover 8000 billion deposits on current account and savings account. 160 billion! This represents some 500 euros per capita euro area. 500 euros per capita, while that banks have in turn hire and what with our savings!

When the real "reserves, excess reserves, with which banks lend and face the withdrawals, they are only a few billion euros or just over 3 euros per capita. To explain things clearly, if all the inhabitants of the euro area would remove 3 euros at the same time, without intervention by the Central Bank, much of the banks would find themselves automatically under the legal minimum reserve. 3 euros per capita, the flexibility of banks. Our language has not I think of a single term to describe this situation: "the foutage of mouth."

How does our banks with so little money? Today, most communication is by check, bank transfer or credit card. In fact, requests for cash withdrawal are quite limited. The amounts of each incoming and outgoing bank cancels most often so that very little money usually comes out of the banks. If a bank falls below the minimum statutory reserves, it will find the funds normally available on what is called the interbank market. Banks with excess reserves to lend to those who lack the reserve. But if gradually, people derive more and more tickets, and reserves tend dangerously towards the legal minimum. The Central Bank intervenes and lends to banks or buying securities. Basically, without the continuous assistance of the ECB, the system can not stand.

Knowing that the loan system usually works well and the Central Bank is there to come to the rescue at the slightest problem, they grow their lending to the limit. Airbag 0. How surprised by the violence of the shock wave from a falling investment bank Lehman Brothers as midsize. Without a market for interbank lending, banks may find themselves in a few hours in great difficulty because they have provided virtually no safety margin in cash. After the bankruptcy of Lehman Brothers, a general distrust has set in, nobody knows the other's exposure to that bank. Basically everyone feared that the other will go bankrupt and banks have stopped lending to each other. We must realize that in light of banks' excess reserves, transfer of reserves of a few million euro can put in the red banks weighing several dozen billion euros of deposits. The Central Bank should intervene in a few hours to save the whole banking system by lending them money or buying securities (usually government bonds). Central banks are kind of Nanny State banks to flying to the rescue of our teenagers are our fiery as when banks can not meet their commitments.

How to live under the illusion of a free market, where the daily intervention of an instance government is necessary for the survival of our economic system. Impose minimum reserves larger would not solve the problem. Indeed, they are not "reserves" as we have already shown. Impose compulsory excess reserves would also be meaningless. For reservations are "reserves" should be able to touch it when you need it.

No, the only solution is to separate banking functions. The applicant on account does not want to take risk. He wants to file Money and power have when it sees fit without relying on the investment policies of banks. They are 100% reserves are necessary as we stand on this site for such filing. The applicant on account needs a "digital cash". The "digital cash" has the same properties as a ticket or room, but in digital format. Basically this means that all money is in reserve accounts of the European Central Bank. The transition has been explained at length in the note 'Advocacy for a monetary revolution. " It was explained precisely the great American economist Irving Fisher in "100% Money" and Nobel Laureate Maurice Allais French economy in the "capital tax and monetary reform."

The applicant hopes on savings account interest. This efficiency means taking risks. This risk-taking, he should wear it and it will be realized by choosing the bank where it will deposit its money. By depositing money in a savings account, the customer is an "investment" with the risks involved. Free the bank to fix also the amount of reserves they want. This are the minimum reserve of 0% must be imposed on savings account. We can never prevent the company that takes a risk to go bankrupt but you can not accept that our economic system depends on the survival of a particular bank. By imposing 100% reserve is to protect both the applicant and the whole economy of the major risks of financial meltdown.

Can we continue in a hybrid system where a triple play disempowerment:

- Banks can take Risk phenomenal with its depositors' money by keeping airbags very low, given that the Central Bank will always be there to lend him money if necessary.

- leaving the state banks to lend 98% of depositors' money on current account delegates the control of money to private institutions.

- The applicant has knowledge that the state guarantee will put his money anywhere without seriously considering if the investments of the bank is serious or not, looking just how much return it offers.

The proposed system would involve a threefold responsibility:

- Banks are empowered because they have to bear the costs of their bad investments or taking excessive risk. The "current account management" would be 100% secure because the money would stay warm in the reserves. The "management savings account" it would be risky and mismanagement lead to bankruptcies.

- The state would have to defend at all costs money to its citizens and prevent banks from circumventing the law by disguising current account savings accounts (by preventing transfers by check or credit card since such filing for example). The state would take the same time full control of currency and would be responsible for "total" control of its value.

- The applicant assured knowing that no state would protect the savings banks in bankruptcy would have to choose carefully or the bank invests its money. Instead, he would know that its current account deposit would be covered by wilderness and thus available at any time regardless of the situation.

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How irresponsible policy of the European Central Bank increased to an austerity policy.

During the few years preceding the crisis, the ECB has been accused of applying a rigorous, rigid for the sole purpose of maintaining a stable price level without worrying about the imperatives social benefits of strong economic growth. The debate has raged between two legions: those who argued that price rigidity was the best policy Monetary economically possible and those who defended the view that a more lenient credit policy with lower interest rates, this price inflation slightly higher, would have positive economic effects. Proponents of this second opinion has continued to rehash the American example, the central bank kept rates lower than those of the ECB, which had higher growth. According to them, with rates somewhat lower and a little more inflation, the European machine would cease to be clamped and could finally prevail in globalization.

The so-called rigidity of the European Central Bank has taken root in the media discourse in three ways:

- Inflation has remained low since the establishment of the ECB, which would imply any "logical" a very strong political discipline within the central bank

- A speech rigor constantly rehashed by the ECB executives, especially Mr Trichet seemed not to have that price stability

- The Articles ECB does give the European central bank that the price stability objective

- Finally, the relative rigidity of interest rates, many less reactive to the "cycles" economic Fed.

First, it should be noted that the rates by the ECB as decried by the business press and many authors have been in the years preceding the crisis at historically low levels between 2 and 4%. For the European central bank, interest rates are the primary means of monetary control since it was through them that it regulates the demand for loanable funds from the central bank from private banks.

Then, beyond the index Official prices, look what has really been the policy of the ECB during the last 5 years. The ECB has a direct control on bank reserves and notes in circulation. The rest goes on within the banks through the "multiplier bank (credits are deposits).

Growth - Banknotes and coins in circulation

2003: 22.1%

2004: 16.8%

2005: 12.3%

2006: 10.1%

2007: 8,

1% 2008: 13.5%

Growth in 6 years: 116%

growth of bank reserves:

2003: 5.32%

2004: 7.74%

2005: 12.46%

2006: 12.17%

2007: 11.26

% 2008: 4.71%

growth in 6 years: 66%

We already see that we are very far from the strict policy as we described. The ECB has had a policy totally lax. It has increased the monetary base (reserve tickets + + pieces) in an absolutely huge.

look at the effects on the currency truly outstanding during the last 6 years we have carried out the current crisis.

Growth of broad money supply M3

2003: 4.6%

2004: 5.8%

2005: 11.3%

2006: 13.8%

2007: 12.3%

2008: 6.9%

growth over 6 years: 68% (note the promiscuity with reserve growth)

lax policy the ECB has been a result of extremely rapid growth means payment. It must be remembered that these years have seen a growth of 2 to 3% per year. Thus the quantity theory of money says that if you target an inflation rate of 2% would require a growth in money supply by about 5% (Inflation: 2% + 3% growth = M3 growth: 5% ). Now they are growing more important in M3 we saw in 2005, 2006 and 2007. La banque centrale au lieu de ralentir ce mouvement en restreignant la monnaie de base a continué à émettre des montants très important de monnaie de base.

The question that arises is: why all this new money injected did not cause an inflation of consumer prices. Depending on the quantity theory of money, a fall in the rate of movement of means of payment could explain this. Yet it had no particular reason to fall so heavily to compensate for inflation should be around 10% in 2006, for example. A second possibility is that this money could have been used and circulated largely for other purposes as the purchase of consumer goods.

This second hypothesis is largely confirmed by the huge asset bubble that we lived during the same period. Prices have soared in the real estate sectors, stocks, commodities and the number of transactions has simply exploded in the same markets. Now the asset market follows exactly the same quantitative law that the market for consumer goods. The more money available and it is moving faster, prices will rise.

The newly issued money has probably moved in a sort of parallel financial system where it was used largely to speculate on the asset market. If there had not been this great monetary expansion initiated by the ECB, it was almost impossible to see oil prices multiplied by seven, those shares doubled in recent years and property prices become absolutely unaffordable for many of Europe. The credit has cast afloat in the financial markets spurred even the ECB to disconnect the prices of assets of any economic reality. For almost a year, is the explosion of this same spirit that we exploded in the face and hurt so many economies.

The ECB was in a very difficult position. Growth the years 2003-2007, although we now appear to be quite respectable, was seen as an economic failure in France, Germany, Italy and many other countries in the Eurozone. Higher rates to calm the speculative bubble would have been, despite the central bank independence, politically untenable. Inside the mind of our policies, there would have been "inflation is low, so why constrain further growth." Yet there was inflation, very high inflation in asset prices, perhaps inflation worst kind when it is uncontrolled.

History certainly forget this media frenzy, this strange moment in economic history when facing a central bank pursuing a policy strongly expansionary economic and political figures have continued to ask him to be even more irrational.