Unless otherwise defined, this refers to purchases of securities on the secondary market by a central bank, which thus indirectly finances the government. – In the wake of the Greek crisis, for example, the ECB began purchasing government bonds of euro area member states that had fallen very sharply in price (Securities Markets Program, SMP) in the summer of 2010. This was generally regarded as a breach of taboo; the ECB was even referred to as the bad bank of the euro area. In principle, it cannot and must not be the task of a central bank to buy securities that the market does not want (rubbish papers); garbage papers), because – in the worst case scenario, the central bank is left sitting on these papers, i.e. it suffers a loss, – some eurozone states understand the central bank’s intervention as meaning that the ECB is available as a buyer of their debt if necessary, and – such action – as has been shown – provokes dispute in its own ranks – the Bundesbank President Axel Weber and the ECB’s Chief Economist, Jürgen Stark, resigned in protest against the SMP, – whether the ECB should be allowed to act as a repair institute for reckless fiscal policies of member states, – even whether European monetary policy should now be subordinated to fiscal policy and the insolvency risk of individual states. – The ECB’s purchase of government bonds on the secondary market significantly diminished its reputation among the population. Doubts about the ECB’s independence not only increased, they even outweighed them, especially since politicians publicly called on the central bank to include the government bonds of ailing eurozone member states in its portfolio. – When the various purchase programs failed to bear fruit, central banks (in Japan, the U.S. and also the ECB) upped the ante. In doing so, the central banks also pushed the long-term interest rate on the capital market close to zero. This drives away private bond buyers. They will have to buy equities in search of an acceptable yield. In the course of this, records are celebrated on the stock market; bubbles are created. – The central banks defend this policy by saying that they only want to stimulate investment through cheap money; and that they could easily „suck out“ the excess money with the increased economic power resulting from additional investment. In reality, however, this policy of the central bank has always led to debtor countries seeing less reason to introduce long overdue structural reforms and thus to increase their competitiveness. It is the savers and insured persons who have to pay for such central bank measures through cold expropriation, as has been proven beyond doubt in the case of the ECB’s policy. But the fact that a central bank is clearly pursuing a policy of distribution by this concealed detour (in secret; out of sight) is absolutely unacceptable, above all because of its lack of democratic legitimacy. However, because the overwhelming and opinion-forming majority is by far more interested in the manageable clubbing of a football club and hardly in the not easily comprehensible interrelationships of the national economy, the central bank can act almost uncritically as a shadow government. – See AIG deal, fear, perverse, bond spread, presumption, central banking, bail-out, bank, systemic, banking union, bazooka, balance sheet adjustment, blame game, risk sharing, ClubMed, covered bonds, deficit financing ban, democracy deficit, expropriation, cold, Eurobonds, common, European Monetary Union, fundamental error, ECB sin, Greece crisis, Ireland crisis, emergency liquidity assistance, moral hazard, nuclear option, Plan C, policy clamp, policy default, quantitative easing, bailout, seven percent limit, sovereign debt repayment, debt drug, debt repayment pact, European, transfer union, redistribution, central bank-induced, fuzziness, constructive, contract compliance, confidence bubble, zombie bank. – Cf. ECB Monthly Report, June 2010. pp. 24 ff. and p. 33 ff. (dramatic situation in financial markets necessitated rapid ECB intervention through government bond purchases), ECB Annual Report 2010, p. 21 (justification of purchases), ECB Monthly Report, September 2011, p. 57 ff. (ECB’s rationale for continuing its Securities Markets Program), ECB Monthly Report, December 2011, p. 44 (more recent figures).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/

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