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Have Central Banks Been Breaking The Law?

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/10981011/Have-central-banks-been-breaking-the-law.html

The world’s major central banks have certainly been having a fair old go at it. In the six years since the financial crisis first broke, they’ve been printing money like there is no tomorrow.

Fortunately, they have not yet managed to bring down the free market system. On the other hand, they have succeeded in putting a rocket under asset prices and, in so doing, they have greatly exaggerated the wealth divide.

In a number of cases, including the US and the UK, they have also significantly assisted governments in financing burgeoning fiscal deficits. To the extent that quantitative easing (QE) has had any effect at all, it is asset prices and governments that have been the prime beneficiaries.

This might seem something of an old issue now; the Bank of England stopped buying assets more than two years ago, while the US Federal Reserve is “tapering” fast. For the US and Britain, the age of “unconventional monetary policy” seems to be largely over.

Elsewhere, however, QE remains very much a work in progress. In Japan it’s continuing at heroic pace, while on the Continent the European Central Bank is being urged by the International Monetary Fund to stop dilly-dallying in the face of deflationary pressures and get on with it.

Full marks, then, to Prof Andrew Johnstone and Trevor Pugh, of Sheffield Institute of Corporate and Commercial Law, for a new analysis, The Law and Economics of QE, which concludes that not only has QE been largely ineffectual but that it was also illegal.

Like common brigands, central banks have been acting outside the law – their only real excuse being the supposedly higher purpose of economic necessity, a sort of Robin Hood-type operation where the ends justify the means, only with a slight flaw; by driving up the value of financial assets and real estate, QE further skews the distribution of wealth towards those with already large holdings of it. It robs from the poor and gives to the rich. Not that there is any possibility of the courts judging QE in all its various forms to be against the law, the writers concede. In Europe, the European Court of Justice has admittedly been asked to rule on ECB bond buying, but will almost certainly deem it to be a necessary price for holding the eurozone together. Never mind the law, the single currency comes first.

Interesting that a nutjob idea that the central banks are acting illegally is finally getting in to the mainstream press.

Although it's OK to have this type of revolutionary thought in now as no one will read it as people are distracted with other news.

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QE would be the end of Europe and the EBC know it! You can see the effect QE has had in the UK & USA, increasing inequality.

Imagine Europe printing shite loads of cash, large asset bubbles and millions of homeless - Europe wouldn't last.

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Didn't know the law applied to the Bank of England, it certainly doesn't when it comes to knowing who the shareholders are or its accounts.

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QE would be the end of Europe and the EBC know it! You can see the effect QE has had in the UK & USA, increasing inequality.

Imagine Europe printing shite loads of cash, large asset bubbles and millions of homeless - Europe wouldn't last.

Yeah, but the UK and the us will be just fine.

There is a 2nd crash coming.

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Didn't know the law applied to the Bank of England, it certainly doesn't when it comes to knowing who the shareholders are or its accounts.

Yes it does. Whatever you think you know about the BoE being owned by a secret group of banks is just an urban myth, easily disprovable.

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Yes it does. Whatever you think you know about the BoE being owned by a secret group of banks is just an urban myth, easily disprovable.

I thought the BoE was nationalised in 1946.

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