In a different release the ECB announced that it will amend the rules governing its forex management.
On 20 July 2007 the Governing Council adopted a Guideline amending Guideline ECB/2006/28 on the management of the foreign reserve assets of the European Central Bank by the national central banks and the legal documentation for operations involving such assets (ECB/2007/6). The Guideline will be published shortly in the Official Journal of the EU and on the ECB’s website.Let's see what this will be about.
A look at the ECB's balance sheet alerts this blogger to the structural shifts in the ECB's assets. Surprisingly bank loans have grown only moderately to 465 billion Euros from 450 billion at the end of 2006.
But the trash can gets fuller and fuller. So called "other assets" now amount to 251 billion Euros. At the end of 2006 this position was 217 billion. According to the ECB
The position other assets is a collective item including, in particular, items in the course of settlement (settlement account balances, for example the float of cheques in collection), coins of euro area Member States and other financial assets (e.g. equity shares, participating interests, investment portfolios related to central banks' own funds, pension funds and severance schemes or securities held due to statutory requirements). This item also contains tangible and intangible fixed assets, revaluation differences on off-balance-sheet instruments as well as accruals and deferred expenditure.
I, for one, do not accept the theory that monetary inflation will save the markets from their inevitable demise brought upon by too much liquidity.
Central banks have lost the most important game already. Their two-faced behaviour made them lose any credibility and soon they will look like one-trick ponies.