“TO WAR! TO WAR! THE (CENTRAL BANKS ARE) GOING TO WAR!...YOU THINK THIS (CURRENCY’S) IN BAD SHAPE, JUST WAIT ‘TIL I GET THROUGH WITH IT!”

2/19/13

European Central Bank (“ECB”) President Mario Draghi was an active participant in last week’s G-20 meeting in Moscow, the conclave at which financial officials from throughout the world fell all over themselves denying that they were engaging in manipulation of the value of the currencies under their tutelage.   Yesterday, Mr. Draghi again insisted that the ECB has no target for the euro’s value.

So why did Mr. Draghi, as this morning’s (i.e., Monday, 2/19/13’s, page A8) Wall Street Journal reported, suggest

significant further gains in the euro zone’s currency may prompt stimulus measures from the ECB.

If the ECB’s stimulus measures are designed only to juice the euro zone economy and any consequences for the euro are purely ancillary, why would further gains in the euro prompt further stimulus measures?   One could argue, with only a slightly out of kilter face, that a strong euro might hurt euro zone exports, slow its economy, and thus prompt stimulative action, but that would appear to an objective observer to be only a rationalization.

Mr. Draghi’s engaging in at best only slightly clothed currency manipulation is also indicated by his also saying yesterday

“The exchange rate is important for growth and stability.”

On the other side of the world, new Japanese Prime Minister Shinzo Abe is threatening to attempt to legislate a less independent Bank of Japan (“BOJ”) if the bank doesn’t reach the 2% inflation target the BOJ set under pressure from Mr. Abe.  At least Mr. Abe is threatening to eliminate the BOJ’s independence legislatively; in this country, the Bush/Obama Administration stole the Fed’s virtue (to little protest from, indeed the willing submission of, Obsequious Ben and His Merry Men) without bothering to deal with the niceties of the law.

It’s bad enough that the world’s central banks are obviously engaging in a currency war.   That they are out and out lying about it, and assuming that we are too stupid to see through their diaphanous ruse, is perhaps even worse.