This would make the bank more accountable to parliament, while not reducing its independence in monetary operations.
In these standard monetary operations the 19 central banks share the risk of any losses, in proportion to the size of their economies and populations.
Mr. Trichet added the purchases would be "sterilized," a reference to offsetting monetary operations that would minimize their impact on the money supply.
Until 1990, internal monetary operations were conducted in inconvertible local currency, while external operations were conducted either in foreign currency, especially U.S. dollars, or, for the Soviet bloc, in special units of account such as convertible rubles.
If government-bond purchases are monetary operations, as the ECB claims, the ESM is overreaching; if they are fiscal operations, it is the ECB that has crossed the line.
And central banks can widen the range of assets they use for monetary operations.Even so, a recent OECD study suggests that governments may decide that the complete elimination of their bond issuance is not desirable.
This resulted because there was no deposit insurance, so bank deposits literally disappeared when banks failed, and because the Fed refused to offset the resulting fall in the money supply through open-market monetary operations.
There's a simpler, better way for the Fed to conduct its monetary operations.
Instead, the Fed picks an interest rate and gears its monetary operations to maintain that rate.
Instead, the Fed would conduct monetary operations to keep the dollar within a gold-price range of, say, $500 to $550.
