Alasdair Macleod: The European Central Bank and John Law
By Alasdair Macleod
GoldMoney, St. Helier, Jersey, Channel Islands
Thursday, March 17, 2016
Last week the European Central Bank extended its monetary madness, pushing deposit rates further into negative figures.
It is extending quantitative easing from sovereign debt into non-financial investment grade bonds, while increasing the pace of acquisition to E80 billion per month. The ECB also promised to pay the banks to take credit from it in "targeted longer-term refinancing operations."
Any Frenchman with a knowledge of his country's history should hear alarm bells ringing. The ECB is running the Eurozone's money and assets in a similar fashion to that of John Law's Banque Generale Privee (renamed Banque Royale in 1719), which ran those of France in 1716-20. The scheme at its heart was simple: Use the money-issuing monopoly granted to the bank by the state to drive up the value of the Mississippi Company's shares using paper money created for the purpose. The Duc d'Orleans, regent of France for the young Louis XV, agreed to the scheme because it would provide the Bourbons with much-needed funds.
This is pretty much what the ECB is doing today, except on a far larger eurozone-wide basis. The need for government funds is of primary importance today, as it was then. ...
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