Here's what Draghi meant when he said the ECB would "cope"

Even the ECB is getting creative now.

At today’s  European Central Bank post-meeting news conference, we discovered that ECB President Draghi and his fellow Governing Council members are pulling on their walking boots for a trip into unexplored territory namely, negative interest rates.

We all dozed through his opening, oft-repeated remark that the ECB, "stands ready to act", (if economic developments so-demand), but then, much more significantly, he repeated the phrase in response to a journalist’s question about whether the ECB would ever consider taking the Deposit Rate negative-that counts as a hint in my book, the markets seemed to agree, and everyone sat up in their seats to listen with rapt attention as he pushed home the hint by saying the ECB would "cope" with any unintended consequences of negative interest rates. That removed the last obstacle-hitherto, the ECB’s response to negative rate speculation has always been to refer to such fears. He also repeatedly emphasised the extent to which the Governing Council feels the transmission mechanism from low ECB policy rates to increased and cheaper lending to real people and businesses had healed itself, even in the Periphery, i.e. therefore, conventional policy tools are once again back in play and potentially efficacious.

I was also impressed by the way he didn’t repeat his usual mantra about not pre-committing to interest rate moves-he usually leaps down anybody’s throat if they’re silly enough to try and get him to do that!

Here’s what he meant when he said the ECB would "cope" with any nasty side effects of negative policy rates. The most frequently sighted potential undesirable consequence is an inability on the part of banks to fund themselves adequately, because Money Market Funds will be unwilling or statutorily unable to lend to banks at negative interest rates, for fear of "breaking the buck" in terms of their redemption prices to investors. So, the story goes, banks will become illiquid. Again.

However, the ECB has already proved to us all that liquidity is its party piece-witness its  Long Term Refinancing Operations and Outright Monetary Transactions, (well, witness the latter’s description at least, since it’s yet to be used in practice). Liquidity is what the ECB feels it’s there for, and what its mandate allows, as opposed to anything that smacks of the provision of deficit funding to governments.

This is what Draghi meant when he said the ECB would "cope". Even as he spoke, the ECB’s boffins were no doubt crafting some new, diabolically clever liquidity scheme.

The psychological effects of actually paying money every day to deposit money at the ECB would have quite a dramatic effect upon banks-more than that to be expected from a cut of only 0.25 per cent, and not only would this small move down in interest rates have an amplified effect upon banks’ willingness to lend, it will also lead the man in the street to think again before putting his money on deposit. Why not go and spend it-surely all these weird experiments  monetary policy must lead to inflation at some stage, so maybe better to buy that car now, before it costs more next year?

And if it works for the ECB, why not for the Bank of England and its incoming and undoubtedly imaginative new Guv’, Mark Carney? His defeated  Deputy, Paul Tucker, has already floated the concept.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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"We repealed, then forgot": the long shadow of Section 28 homophobia

Why are deeply conservative views about the "promotion" of homosexuality still being reiterated to Scottish school pupils? 

Grim stories of LGBTI children being bullied in school are all too common. But one which emerged over the weekend garnered particular attention - because of the echoes of the infamous Section 28, nearly two decades after it was scrapped.

A 16-year-old pupil of a West Lothian school, who does not wish to be named, told Pink News that staff asked him to remove his small rainbow pride badge because, though they had "no problem" with his sexuality, it was not appropriate to "promote it" in school. It's a blast from the past - the rules against "promoting" homosexuality were repealed in 2000 in Scotland, but the long legacy of Section 28 seems hard to shake off. 

The local authority responsible said in a statement that non-school related badges are not permitted on uniforms, and says it is "committed to equal rights for LGBT people". 

The small badge depicted a rainbow-striped heart, which the pupil said he had brought back from the Edinburgh Pride march the previous weekend. He reportedly "no longer feels comfortable going to school", and said homophobia from staff members felt "much more scar[y] than when I encountered the same from other pupils". 

At a time when four Scottish party leaders are gay, and the new Westminster parliament included a record number of LGBTQ MPs, the political world is making progress in promoting equality. But education, it seems, has not kept up. According to research from LGBT rights campaigners Stonewall, 40 per cent of LGBT pupils across the UK reported being taught nothing about LGBT issues at school. Among trans students, 44 per cent said school staff didn’t know what "trans" even means.

The need for teacher training and curriculum reform is at the top of campaigners' agendas. "We're disappointed but not surprised by this example," says Jordan Daly, the co-founder of Time for Inclusive Education [TIE]. His grassroots campaign focuses on making politicians and wider society aware of the reality LGBTI school students in Scotland face. "We're in schools on a monthly basis, so we know this is by no means an isolated incident." 

Studies have repeatedly shown a startling level of self-harm and mental illness reported by LGBTI school students. Trans students are particularly at risk. In 2015, Daly and colleagues began a tour of schools. Shocking stories included one in which a teacher singled out a trans pupils for ridicule in front of the class. More commonly, though, staff told them the same story: we just don't know what we're allowed to say about gay relationships. 

This is the point, according to Daly - retraining, or rather the lack of it. For some of those teachers trained during the 1980s and 1990s, when Section 28 prevented local authorities from "promoting homosexuality", confusion still reigns about what they can and cannot teach - or even mention in front of their pupils. 

The infamous clause was specific in its homophobia: the "acceptability of homosexuality as a pretended family relationship" could not be mentioned in schools. But it's been 17 years since the clause was repealed in Scotland - indeed, it was one of the very first acts of the new Scottish Parliament (the rest of the UK followed suit three years later). Why are we still hearing this archaic language? 

"We repealed, we clapped and cheered, and then we just forgot," Daly says. After the bitter campaign in Scotland, in which an alliance of churches led by millionaire businessman Brian Souter poured money into "Keeping the Clause", the government was pleased with its victory, which seemed to establish Holyrood as a progressive political space early on in the life of the parliament. But without updating the curriculum or retraining teaching staff, Daly argues, it left a "massive vacuum" of uncertainty. 

The Stonewall research suggests a similar confusion is likely across the UK. Daly doesn't believe the situation in Scotland is notably worse than in England, and disputes the oft-cited allegation that the issue is somehow worse in Scotland's denominational schools. Homophobia may be "wrapped up in the language of religious belief" in certain schools, he says, but it's "just as much of a problem elsewhere. The TIE campaign doesn't have different strategies for different schools." 

After initial disappointments - their thousands-strong petition to change the curriculum was thrown out by parliament in 2016 - the campaign has won the support of leaders such as Nicola Sturgeon and Kezia Dugdale, and recently, the backing of a majority of MSPs. The Scottish government has set up a working group, and promised a national strategy. 

But for Daly, who himself struggled at a young age with his sexuality and society's failure to accept it, the matter remains an urgent one.  At just 21, he can reel off countless painful stories of young LGBTI students - some of which end in tragedy. One of the saddest elements of the story from St Kentigern's is that the pupil claimed his school was the safest place he had to express his identity, because he was not out at home. Perhaps for a gay pupil in ten years time, that will be a guarantee. 

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