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unprecedented attention to higher-frequency economic developments. Many new
lessons have been learned; many policy and institutional innovations have been
introduced.artificially.We started with a too-big-to-fail problem, and part of the policy
response to the crisis has been even more financial consolidation.JP Morgan
took over Bear Stearns and Bank of America took over Merrill Lynch.What we have
now is financial institutions that are even bigger.Those institutions, even
more than before, know if they do something very risky, something reckless, they
will be bailed out again.

Banks cannot participate voluntarily in illegal acts, such as fiduciary
imprudency.Bank directors are committed to bank's welfare, and not the public
interest.If bankers waive outstanding debts at the expense of the bank, this is
a breach of trust and punishable by law.All those bankers, that IIF claims plan
to participate in rollovers, might go to jail for violating the fiduciary duty
of prudency!October-18 Mafia pressures the banks to participate, but it really
opens Pandora's box.

Trichet points out the recent financial crisis has produced a large and
persistent downturn in our economies; a downturn, moreover, that threatens our
long-run growth potential.It is therefore entirely natural that policy makers
do not lose sight of the prerequisites for stable sustainable growth.

This is especially so for most of the advanced economies, including the euro
area, characterized (as it has been in recent decades) by declining potential
growth rates.In the face of any economic predicament, one should ask oneself
two questions what got us here, and what can get us out?In the wider case of
sustainable growth for the euro area, what matters is a commitment to structural
reforms and sound macroeconomic policies.In the case of the financial matters,
a robust macro prudential and supervisory framework is key.I will address both
these issues in my coming remarks.

Likewise, some may consider it unusual to solicit views on matters of long-run
growth from the President of a central bank. After all, pick up just about any
growth-theory textbook and you'll find few references to inflation and fewer
still to monetary policy.Monetary policy is fundamentally viewed as neutral
over the long run.

Financial and fiscal stability concerns will make it difficult for central banks
to aggressively fight inflation pressures once they emerge.The European Central
Bank is just the latest victim, the sovereign and banking crises have forced it
into actions that threaten to undermine its credibility over time. The gold
price and exchange rates have already been signaling a loss of confidence in the
value of fiat money for some time.

Trichet a*serts that inflation is ultimately a monetary phenomenon.Growth, in
turn, is ultimately a real one reflecting, in particular, technology, education
and training, capital accumulation, institutional quality.

Nonetheless, monetary-policy institutions can play and have played a fundamental
role in supporting long-run, sustainable growth.In many ways, I see a parallel
between the theory and practise of monetary-policy making and the shaping of
modern growth analysis which emphasises the role of sound/proper institutions.

That achieving high and sustainable growth matters, however, is easy to
motivate.On the subject of growth differences across countries, Lucas (1988)
memorably wrote: The consequences for human welfare involved in questions like
these are simply staggering: Once one starts to think about them, it is hard to
think about anything else.

Banks in PIGS have unloaded risks amounting to one trillion euros with central
banks. The central banks have distributed large sums to their countries'
financial institutions to prevent them from collapsing.They have accepted
securities as collateral, many of which are garbage.These risks are now on
ECB's books, because the central banks of eurozone are not autonomous but, part
of the ECB system.When banks in PIGS go bankrupt and their securities are
garbage, the euro countries must collectively account for the loss.Bundesbank,
provides one third of the ECB's capital, which means that it would have to pay
one third of all losses.eurozone's Stability and Growth Pact, especially Greece.Trichet plays kangaroo,
calling for a quantum leap of mutual control among eurozone governments.ECB
should not be listening to recommendations from Eurokleptocrats.

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