The ECB Goes Rogue

Source: The ECB Goes Rogue

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This horrible work “macroprudential”

macroprudFrom @MacroPru tweet and yb video

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Ten ways to tell you might be sitting next to an economist (The Economist on Airline safety)

“AN ACADEMIC economist was taken off a plane last week after a fellow passenger became suspicious. He was feverishly scribbling what she thought was “terrorist code” or foreign lettering into a notebook. It turned out that Guido Menzio, an Italian economist from the the University of Pennsylvania, was working on some differential equations for a model on menu costs and price dispersion. Thankfully, Mr Menzio was allowed back on his flight.”
More read here:

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Central banks – the new normal

Central banking and monetary policy – which will be the new normal? is a one day conference co-organized by SUERF/BAFFI Carefin. Right on time BIS has published research discussing negativity of negative interest rates.

Financial Times discusses the matter with invited guests in their video blogg



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The challenges of central bank divergence

“The US is years ahead of the EU in recovery and so at a different stage of the monetary policy cycle”- writes Financial Times

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Charles Wyplosz on ECB communication

ECB minutes: What they really tell us
“The ECB has finally begun releasing the minutes of its policymaking meetings, something the world’s major central banks have been doing since the 1990s. This column asks whether the publication of these minutes increases ECB transparency. While providing useful information on analysis at the ECB, the minutes lack the details on the actual discussions and the voting behaviour of committee members that the minutes of the Fed, the Bank of England and the Bank of Japan provide. They thus constitute just the first step, albeit a very welcome one, towards ECB transparency.”

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Big Bad Wolf of Financial markets – financial innovations

The more I read about financial market and reasons of the current crisis – the more amazed I am and the more I like this job. Such an entertainment!

Currently I read a CEPR report from 2009 about market regulation and so on, and I start admiring bankers even more. On the page 2 of the report we read: “While it was thought
that these [financial] innovations were beneficial because they transferred banking risk to nonbanking institutions, we have to acknowledge now that in practice they imported systemic risk from non-banking institutions and securities markets to the heart of the
banking system.”

Financial regulators looked at this process with a passive attitude and content that the risk is moved out from the banking sector. At the same time, credit agencies decided about the future of many companies grading their condition while being not entirely neutral and objective.

And further I learn about factors , p. 91: “underlying amplification mechanisms
that turned several hundred billion dollars of losses in the subprime mortgage
market into a multi-trillion dollar destruction of wealth.”

Even though I’ve read about this so many times and heard about this even more often, it’s really exciting to read further.

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What central banks will do this year

bcbBloomberg’s forecast:

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Central banks are powerful


“Once the dust settles, the markets will come to recognise that the SNB did it right. Central banks are powerful because they can take important decisions, not when they are seen to bow to market pressure. Remember the taper tantrum that followed President Bernanke’s gentle reminder that QE was not for ever. This pre-announcement was also seen as a loss of credibility. It seems that central banks can never win when their actions cause investor losses.”
Charles Wyplosz on the end of the Swiss franc’s one-sided exchange rate band.
More here:

(Picture from the Economist and Miles Cole)

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So ECB pumps 60bn euro monthly while Greeks…

“Withdrawals from Greek banks exceeded 14 billion euros ($15.9 billion) in the run-up to the snap elections that catapulted the anti-bailout Syriza party to power, including 11 billion euros that were taken out in January, the person said. Between Jan. 19 and Jan. 23 outflows were greater than in May 2012, when Greece was on the brink of exiting the euro area.” reports


But the money cannot return so fast back to Greece because, as Reuters explains

Also limiting the QE impact on Greece is the limit the ECB imposed on purchases, which is 33 percent of a country’s bond issuance. The ECB already holds a large amount of Greek bonds, so it will not be able to buy new ones until June when some of them expire – and even then only if Athens is in a new bailout programme.”

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