When economists start yellin',  ECB jumps?

Assurances on Euro by Central Bank Chief Lift Stocks
By Jack Ewing, New York Times, July 26, 2012

FRANKFURT — The European Central Bank appears increasingly willing to throw around its weight in bond markets to hold down borrowing costs for Spain — or at least wants traders to worry that it will.

The euro and European stocks rose sharply Thursday after Mario Draghi, president of the E.C.B., said in London that the bank would “do whatever it takes to preserve the euro.”

His comments were interpreted by some to mean that the E.C.B. might resume intervening in bond markets to keep borrowing costs for Spain and Italy under control.

The E.C.B. would stay within its mandate, Mr. Draghi said in remarks at an investment conference. But he added that if government borrowing costs interfered with the central bank’s ability to influence interest rates, “they come within our mandate.”

Mr. Draghi did not explain how the E.C.B. mandate would apply in this case, but the bank's main task under its charter is to maintain price stability, which it typically does by adjusting interest rates. As it has in the past, the E.C.B. could justify bond market intervention as a way of ensuring its control over interest rates.

The E.C.B. has intervened sporadically in government bond markets since 2010 but has not bought any government bonds for several months. Both the Spanish government and the International Monetary Fund have been urging the E.C.B. to resume buying bonds. But the interventions have been opposed by the Bundesbank, Germany’s powerful central bank, which regards them as a violation of a ban on using the E.C.B. to finance governments.

The mere threat of renewed E.C.B. intervention could help push down borrowing costs for Spain and other troubled countries [....]

I admit I got some feelings of alarm before you posted this, while reading the articles that I posted on topic Tuesday. The feelings weren't about the possible effects on the US economy or the world economy, it was just strong sadness for Europe. I was imagining a new wave of "ugly Americans" tramping allover the place, ala the 1950's. I was thinking, why doesn't somebody point out to the Germans: "can't you see, seems like what you insist on doing may be about to cause some of the things you fear most? Then you posted this piece, and I must admit the use of the word sleepwalking and where they basically say you have a bazooka that would work, why aren't you using it? really rang accurate.

Excellent video, BTW; destroys the argument that the popular music medium doesn't mix well with political commentary (of course, it also could be argued that they are crossing over into the medium of political cartoons with the images.)