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in race for ECB are now not one but two high-ranking officials that mismanaged Eurozone crisis as they
1. Misunderstand how money works in modern, market-based financial systems
2. Misunderstand the critical role of government bonds as safe assets in modern financial systems.
1. Misunderstand how money works in modern, market-based financial systems
2. Misunderstand the critical role of government bonds as safe assets in modern financial systems.
why would we trust the single most important position in Eurozone - head of the central bank - to someone that got it so wrong in the crisis when we have Coeure and Liikanen beats me.
Weidmann still thinks it's outside ECB's mandate to intervene in sovereign bond markets, but now accepts that it may have to be done to preserve integrity of Eurozone. This 'fiscal view of bonds' (German) view is wrong. 
the 'financial view of bonds' recognises that sovereign bonds play critical role in modern financial systems: benchmark, safe asset, HQLA & collateral. This is also the ECB's view - in 2016 Coeure's speech on safe assets or even earlier documents on European repo markets.
The 'financial view of bonds' is increasingly accepted in Brussels circles - this is why we got the Single Safe Asset initiative (SBBSies) approved in the European Parliament earlier this year, initiative promoted by Phillip Lane, new Chief Econ of the ECB.
the financial view of bonds also highlights the financial stability implications of tremors in sovereign bond markets. Both banks and shadow banks' funding conditions rely on liquid&stable sovereign bond markets.
but for Eurozone, fundamental problem is that German bunds play the role of safe asset, for complex historical reasons. This is unsustainable - dont take my word, but that of the ESRB esrb.europa.eu/pub/pdf/wp/esr…
and today head of central bank that denies 'financial view of bonds', that strongly opposed a sensible expansion of mandate to accommodate this view (OMT) offering a half-baked mea culpa.
should we trust someone with this record to deal with Italy's attempts at fiscal sovereignty (however misguided) given systemic size of Italian bond market, and with Donald Trump's new interest in cross-border central bank coordination?
oh yes, a reminder Weidmann basically provided ammunition to super-conservative German academics (I wont call them monetary economists) attach on ECB in German courts
if you want more details - a paper that can be easily downloaded via sci-hub.tw journals.sagepub.com/doi/abs/10.117… and a report in simpler terms feps-europe.eu/Assets/Publica…
