The Road to Canossa. Sean Corrigan

An special Op Ed piece of the bigger Money Macro and Markets supplement written by Sean Corrigan.

That the artificial interest rates in evidence in our hugely distorted capital and money markets can be made negative in nominal as well as in real terms is, alas, the curse of the modern age. Though entirely at odds with natural order – as we have repeatedly tried to make plain – they are also a curse that we are unlikely to have lifted any time soon, especially not in a Europe where there is no effective restraint to be had upon the exercise of his awful powers by the likes of a fanatic like Draghi.

Like some latter-day Pope Gregory, Draghi pretends to a power superior to that of the secular realm’s rulers. Forgetting that it was an act of political will which first set up the ECB, he now demands that the Lords Temporal of the Eurozone shuffle barefoot through the snows to genuflect before him at his seat at that modern Canossa which stands on Sonnemannstrasse.

Though the ‘mandate’ which he unfailingly invokes in place of a claim of descent from St Peter was indeed intended to keep the Bank insulated from the worst, inflationary impulses of the short-horizon politician, it cannot be argued from that one act of self-denying foresight that the ECB is now only subject to a higher court. Laws are, after all, made in parliaments and when it becomes evident that among those laws there are those that have either been made obsolete by events or have become subject to exploitation by the unscrupulous, it is the duty of the people in parliament to highlight such abuses and to set in train the process by which the offending laws will be revised or repealed.

Draghi may bluster all he wants, but his is the office of an unelected technocrat and as such he is only there at the sufferance of the people, speaking through their democratic representatives. He is not God’s instrument on Earth, immune to all challenge or limitation short of the throne of Heaven. The politicians – in a rare moment of self-awareness – chose to put certain matters beyond their immediate sway for the greater good of all. But now that the instrument of their altruism has itself become a scourge of the common weal, can we really argue that they should stand helplessly by, pleading their utter inability to root out the source of the pestilence?

Moreover, the goal of having the solitary, chosen economic indicator of HCPI follow some entirely arbitrary, but allegedly ideal pathway – which Draghi would have us believe is the Alpha and Omega of his ‘mandate’ – was only ever intended to be an easily-communicated and readily comprehensible cipher for the Bank’s practice of a responsible and well-reasoned oversight of certain narrow aspects of a much wider field of economic activity. It was never meant to be proposed as an end in itself, much less fashioned into the key to a Pandora’s Box of monetary madness. Rather, by implication, it was meant to enable the Bank to take only those steps which were sufficient to minimize the impact of mere monetary disturbances, whenever they arose, on the everyday commercial decisions being taken in their untold millions by the many who routinely utilize that money.

Draghi, by contrast, has knowingly used the largely exogenous deviation of the datum from its selected, 2% per annum path as an excuse for a day-and-night campaign of monetary carpet-bombing, one which metaphorically threatens to leave the Continent’s economic infrastructure in a Dresden-like state of devastation and to reduce the people wandering among its smoking heaps of rubble to a similar state of disorientation and dispossession.

But can Draghi’s seemingly obsessive ambition to enforce his will really involve no more than his blind devotion to a ludicrously narrow and largely context-free economic indicator? Surely not. For would that not be seen as senselessness of such a self-evident nature that someone, somewhere would arise to overthrow the tyrant and so restore the Eurozone to sanity?

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