Fun

Christine Lagarde: ‘The European Central Bank Cannot Go Bankrupt or Run Out of Money’

News Feed - 2020-11-24 11:11:24

Christine Lagarde: "The European Central Bank Cannot Go Bankrupt or Run Out of Money"


In remarks that highlight flaws of the fiat currency system, the European Central Bank (ECB) president, Christine Lagarde, says the institution cannot go bankrupt even if it incurs losses running into trillions. According to Lagarde, normal bankruptcy rules do not apply to the ECB primarily because it is the sole issuer of euro-denominated central bank money. The Eurosystem will always be able to generate additional liquidity as needed. Bankruptcy Rules Not Applicable to ECB


The ECB leader made her remarks while responding to a question from an Italian member of the European Parliament. According to a Reuters report, an unequivocal Lagarde argues that central banks and the ECB in particular, are exempt from the established norms. She says: The European Central Bank can neither go bankrupt nor run out of money even if it were to suffer losses on the multi-trillion-euro pile of bonds bought under its stimulus programmes.


In response to the effects of the global pandemic Covid-19, the ECB, just like other central banks, pumped trillions into the Eurozone financial system. The money was intended to help economies hard hit by lockdown restrictions as well as to boost demand for goods and services. However, the unprecedented money creation and borrowings are raising alarm as some believe the ECB went beyond its capacity.


However, in an apparent response to such concerns, the ECB president not only defends the massive borrowing but asserts that financial losses cannot bring down central banks. Lagarde says:


“So, by the definition, it will neither go bankrupt nor run out of money. In addition to that, any financial losses, should they occur, would not impair our ability to seek and maintain price stability.”


Furthermore, Lagarde adds that “there is no legal basis for the ECB to cancel the government debt it owns.” The Fallacy of Unbridled Money Creation Monopoly


Lagarde’s claim that the ECB has unhinged money creation powers has long been the source of concern for opponents of the fiat currency system. One such opponent, the famous Austrian economist Fredrich Hayek wrote a book titled “Denationalization of Money” in which he attacks the fiat currency.


In the book, which was published five years after the world abandoned the gold standard currency system, Hayek argues for free markets even in the sphere of money creation. According to an excerpt from the book’s preface, Hayek states:


“Money is no different from other commodities and that it would be better supplied by competition between private issuers than by a monopoly of the government.”


Hayek, a winner of the Nobel Prize in Economics, argues the case that “money is no exception to the rule that self-interest would be a better motive than benevolence in producing good results.”


Meanwhile, adherents to Hayek’s school of thought including bitcoiners, have consistently used the economist’s arguments when making the case for privately issued cryptocurrencies. They point to the competition that currently exists within the crypto space and how some coins are faltering, while others gain traction.


Lagarde’s latest remarks, as well as recent reports that the global debt will reach unprecedented levels by end of 2020, only helps to buttress the argument for private sector participation in the creation of money.


What do you think of Lagarde’s comments? Share your thoughts in the comments section below. Bitcoin Derivatives See Record Highs, Year-End BTC Options Show 29% Chance Price Crosses $20K FINANCE | 4 days ago Report: Pandemic Response Pushed Global Debt to $272 Trillion in Q3, $5T in Borrowing Expected in Q4 FINANCE | 5 days ago Tags in this story Bankruptcy, Central Banks, Christine Lagarde, COVID-19, Cryptocurrencies, European Central Bank, Eurosystem, Friedrich Hayek, Money Creation, stimulus


Image Credits: Shutterstock, Pixabay, Wiki Commons Spot-markets for Bitcoin, Bitcoin Cash, Ripple, Litecoin and more. Start your trading here. Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments

News Feed

Pepe Whale Triggers Panic, Dumps 150 Billion Tokens As Price Falls
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
Australian stablecoin startup Stables expands to Europe and UK
Tom Mitchelhill25 minutes agoAustralian stablecoin startup Stables expands to Europe and UKStables co-founder Bernado Bilotta says stablecoins are starting to break free of “crypto-native” applications and make their
South Korean convenience store sells Bitcoin-themed 'meal boxes'
Savannah Fortis20 minutes agoSouth Korean convenience store sells Bitcoin-themed "meal boxes"A convenience store in South Korea is offering Bitcoin meal boxes in collaboration with the local exchange Bithumb where custom
Prashant Jha11 hours agoNew book reveals Binance CEO CZ rejected SBF’s $40M request for futures exchangeMichael Lewis’s new book “Going Infinite” reveals that CZ and SBF had different goals when the first collabo
Turner Wright5 hours agoHurricane Idalia delays Ron DeSantis’ reported plans to accept crypto campaign donationsThe storm hit Florida first in the continental U.S., which may have stopped Ron DeSantis from joining Vive
Crypto Biz: Blockchain B2B trending, Telegram’s new ad platform, and more
Ana Paula Pereira2 hours agoCrypto Biz: Blockchain B2B trending, Telegram’s new ad platform, and moreThis week’s Crypto Biz examines concerns over chip shortages and sustainability issues for crypto miners, Telegram
Biggest Movers: SHIB Remains Near 3-Month High, Whilst LEO Hits 2-Week High 
Biggest Movers: SHIB Remains Near 3-Month High, Whilst LEO Hits 2-Week High  Shiba inu remained close to a three-month high to start the week, after breaking out of a key resistan
Deciding who owns your ‘digital twin’ will make or break the metaverse
Tristan Greene4 hours agoDeciding who owns your ‘digital twin’ will make or break the metaverseResearch indicates a secure, biometrically verified digital twin will need to be developed in order for the metaverse to
FinCEN Links More Than $5 Billion in Bitcoin Transactions to Ransomware
FinCEN Links More Than $5 Billion in Bitcoin Transactions to Ransomware FinCEN, the U.S. Financial Crimes Enforcement Network, linked more than $5 billion in bitcoin transactions t
Bitcoin Price On The Brink: Failure To Hold This Level May Trigger Crash To $74,000
Este artículo también está disponible en español. Bitcoin (BTC) and other cryptocurrencies are experiencing renewed selling pressure as escalating trade tensions between
William SubergNov 04, 2023Bitcoin bulls defend $34K as trader predicts next BTC price ‘impulse’Bitcoin is setting up for another trip past $35,000, analysis argues, as BTC price settles into the weekend.18636 Total v
G7 Finance Ministers and Bankers Adopt Guidelines for Central Bank Digital Currencies
G7 Finance Ministers and Bankers Adopt Guidelines for Central Bank Digital Currencies Any digital currency issued by a central bank must support financial and monetary stability, f