Nothing new here:
"In the case of the ECB, Mr Stark’s resignation looks like a symbolic watershed. David Marsh, author of a recent book on the euro, argues that this self-professed hawk stood, more than anyone else on the ECB board, for the original conception of European Monetary Union. This was built round Germany’s stability-minded principles under the disciplined hand of the Bundesbank, where Stark was deputy president until he moved to the ECB as chief economist in 2006. With his departure, says Mr Marsh, the old Bundesbank-style currency union appears to be coming to an end, heralding a new era of uncertainty and unpredictability. Mr Stark is known to have been strongly opposed to the ECB’s bond buying programme, which was stepped up just before he announced his resignation for “personal reasons”. Having added a raft of Italian and Spanish IOUs to its portfolio, the ECB is now sitting on more than €140bn of government bonds, which on any sane criterion of value were bought for more than they were worth...
To return to the issue of central bank credibility, this is not a problem while deflationary pressures are uppermost. Note, though, that the only way the world seems able to deal with the misaligned exchange rates that contribute to the global imbalances at the root of this long running saga is by having China and other emerging markets run higher rates of inflation than those in the developed world, causing their real exchange rates to rise. As the economist Andrew Smithers argues, rapid inflation can lead to crises in emerging markets, so very low inflation in the developed world is essential to achieve a suitable gap in relative inflation rates to permit a crisis-free convergence of living standards between the emerging markets and the mature economies. Delivering that gap will be a challenge for central banks that have seen a marked erosion of their independence and still hanker after unorthodox policy – not least because unanticipated inflation is the most plausible escape route from the overhang of developed world debt."
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