Joking aside, today I will indeed tackle another matter for those who feel exhausted because of never-ending discussions about US dollar trend. On TV100, you can always continue to watch us comment about current economic affairs.
Hardly a day goes by without another international law issues coming to surface. In a previous article, I mentioned retaliatory actions against China over the handling of the coronavirus pandemic. Now we see Europeans are blaming each other.
On May 5, the German Federal Constitutional Court ruled the German Bundesbank’s participation in the European Central Bank (ECB)’s quantitative easing programs could be illegal. According to the members of the Federal Constitutional Court, ECB’s programme may be violating the provisions of EU agreements. Luckily, the ruling only covers monetary expansion; it has nothing to do with the Pandemic Program.
Germany’s Federal Constitutional Court has granted ECB a three-month period to prove the purchases are proportionate or Bundesbank will stop buying government bonds. If the Federal Court rules that ECB’s €2 trillion ($2.17 trillion) public sector purchase program is not based on acceptable grounds, things will get complicated.
The Court added, “If we are convinced that European Central Bank violates laws on monetary financing in its asset purchase programme, we’ll rule that the Bundesbank shall no longer take part in the programme”.
“Not good news for Turkey…”
Since 2015, ECB has purchased more than €2 trillion-valued bonds from the Euro Zone countries, finally becoming the master of monetary expansion. But we should know that:
The “monetary expansion” is still remembered by Germans as the root of evil since the hyperinflation times in Germany during the 1920s. My late father had a paper money collection, which also included a German Papiermark, the currency of the Weimar Republic. It was a 50 billion Reichsmark banknote. During the hyperinflation in Germany of 1920s, it would take a wheelbarrow full of Reichsmarks to buy a loaf of bread since 1 US Dollar was equivalent to 4 trillion 300 billion Reichsmarks.
The hyperinflation era in Germany was sadly followed by Hitler’s rise to power and its bloody ten-year reign. Therefore, Germans hate an irregular course of monetary expansion. Their reaction should be found perfectly normal. Besides, if Bundesbank rules that ECB violates the provisions of EU and Euro Zone agreements in its Asset Purchase Programme, Euro, which has been gaining momentum against other currencies lately, might take a sharp downturn.
In this case, Turkey would experience quite a few economic difficulties, considering that more than 50% of total export trade of Turkey is with the EU. See? I’ve never said a single word about dollar today!