Silence Is Golden

Well this clears up one niggling little doubt about last weeks ECB meeting. Remember my post – when no means maybe – about how Trichet saying ?I am not telling you anything that could be interpreted as preparing a rate cut,? was actually double talk, and what he meant was I am not telling you anything, but I am winking.

Well now that other ECB stalwart, Otmar Issing, has come to our rescue and explains: “Communication is not only about being explicit. It is also about not answering questions”.

So as Reuters Chief ECB correspondent puts it: “He did it through his silence”.

Sometimes I think it may be a good thing if some of our other institutional representatives (Jean Claude Junker?) could learn from his example.

Bottom Line: this has been done this way because, as I suggested it was politically and institutionally impossible to announce a change of policy at last Thursday’s meeting, a rate change can now be expected anytime after the next meeting.

This entry was posted in A Fistful Of Euros, Economics: Currencies and tagged by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

7 thoughts on “Silence Is Golden

  1. Central Bankers of course have a long time to master the codes before they are allowed to talk to reporters. The rotating presidency allows no such time to break politicians in. (Remember how much time was lost at the beginning of the Italian presidency over some dumb remarks in Parliament?) And in an EU-25 it comes around so seldom that there’s no institutional memory. That was very different in the EU-6, when a government could expect to hold the chair twice if it served a full term. Just to provoke the crowds here (not the author of the post), I will say that is yet another thing that the constitutional treaty would improve.

  2. “(Remember how much time was lost at the beginning of the Italian presidency over some dumb remarks in Parliament?)”

    No – how much time was lost? Please be specific.

    You seem to be moving very swiftly from the view that independent agencies shd be careful in talking to the press (true to some extent, but even some central banks like the BoE are more open than others) to the wildly different view that politicians should not comment on policies of independent agencies (misguided and wrong in my point of view, since elected politicians in e.g. the US spend considerable time freely talking about the dollar with no adverse consequences) to the view expressed here that political leaders shouldn’t even be allowed to get into a row with parliamentary deputies. Is any form of open debate or combative politics permissible? The “pas devant les enfants” view of European politics at it worst.

    “The rotating presidency allows no such time to break politicians in… And in an EU-25 it comes around so seldom that there’s no institutional memory. That was very different in the EU-6, when a government could expect to hold the chair twice … that is yet another thing that the constitutional treaty would improve.”
    Since your only central banking example is Juncker, whose multi-year Mr Euro position is more or less the model for the changes which the treaty would introduce to the presidency. So you are using faults (if such they be) of an example of where this change has already occured to argue for this change more widely!

    I could make a more general argument faults with the EU (such as ‘distance from the people’) which the Constitutional Treaty will in fact exacerbate are widely used as material to support the Treaty, but that would be a project for another day.

  3. IIRC, about the first six weeks of the Italian presidency were dominated by the row about “concentration camp guards.” That’s roughly a quarter of the presidency. None of the headline proposals made any progress in this time, and the presidency never really recovered. Contrast the Irish presidency that immediately followed. (If a government wants to spend its six months in the chair squabbling with a parliamentarian, I suppose that is its choice. I’d be hard pressed to claim it’s a good choice, though.)

    Elected leaders should know that loose talk about their currencies has consequences. For the US Treasury Secretary, there is no such thing as an off-the-cuff remark about the dollar. See Bob Rubin. Likewise, for the holder of the presidency. Markets will assume that any remark is an attempt to jawbone the market and react accordingly. Politicians should say what they want. But they should be aware what will follow from what they say, so as not to make a blunder.

    Juncker is PM of Luxemburg, and current President of the Council. What is this Mr Euro business?

  4. Juncker is “Mr Euro”, the President of the Eurozone Finance ministers for 2 years (or 2 and a half – accounts differ). http://www.euractiv.com/Article?tcmuri=tcm:29-129709-16&type=News
    So in fact Juncker is (perhaps uniquely) operating as the President of part of the EU as would more generally be the case if the Constitutional Treaty were to be ratified. If anyone is qualified to say something about the Euro, it’s Juncker.

    “None of the headline proposals made any progress in this time”: That’s what I’d like to see evidence of. Last time I attended a Council working group, progress had nothing whatever to do with what PMs or the media were saying, just as British government is very little affected by the shouting match in Parliament. I doubt it was any different with Berlusconi and the MEPs. But maybe you have an example?

  5. I couldn’t help but check on older posts at the site of Brad de Long.
    I quote two of his commenters:
    “A friend of mine used to attend semi-public meetings with Greenspan. At one of them, halfway through his talk Greenspan looked at my friend and said “is that clear?”. When my friend nodded “yes”, Greenspan started speaking in more and more obscure phrases until by the end of the talk no one could figure out what he was saying.
    I am really not sure that this is the best way for the Fed Chairman to behave.
    Posted by: Cranky Observer | May 24, 2005 05:26 AM

    I have never heard anyone use the word “Greenspan” as verb. However, I did once hear Greenspan say that if someone thought they understood what he had just said, then they didn’t understand what he said.
    Posted by: Bruce Bartlett | May 24, 2005 06:09 AM”

  6. “If anyone is qualified to say something about the Euro, it’s Juncker.”

    I am taking on board your point that he has institutional legitimacy for what he said Otto, but qualified has two meanings. One of them is that you are up to the job. Coming out in the midst of the most important EU crisis in years, and starting to talk down the euro, when possibly some national central banks are offering support, has to put a huge question mark on whether you are ‘qualified’.

    Put it another way, is this the best Mr Euro we can get. Someone somewhere should be quietly suggesting that at the end of the Luxembourg presidency he should quietly step down, needs to spend more time with the family, things like that.

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