Post Tagged with: "banks"

Is the ECB doing QE?

Is the ECB doing QE?

Last week, the ECB announced that it would begin purchasing securities backed by bank lending to households and firms. Whereas markets and the media have generally greeted this announcement with enthusiasm, this column identifies reasons for caution. Other central banks’ quantitative easing programmes have involved purchasing fixed amounts of securities according to a published schedule. In contrast, the ECB’s new policy is demand-driven, and will only be effective if it breaks the vicious circle of recession and negative credit growth.

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This was the most easing Draghi could get and still achieve unanimity

This was the most easing Draghi could get and still achieve unanimity

This is a brief update to my last member post from this morning. Just reviewing what the ECB has done here, we see them taking four out of the five easing measures I outlined in May. The ECB could lower rates. Check The ECB could allow its balance sheet to rise. The ECB has been sterilizing the 170 billion euros […]

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Repairing the transmission of monetary policy through asset-backed securitisation

Repairing the transmission of monetary policy through asset-backed securitisation

By Markus K Brunnermeier and Yuliy Sannikov This post originally appeared on Vox and represents what this site believes is a very likely action the ECB could take for monetary easing later this week. Eurozone monetary policy transmission is broken. A key aspect of this is the failure of credit to get to small and medium enterprises, and consumers. This […]

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On Tim Geithner and my US bailout post-mortem

On Tim Geithner and my US bailout post-mortem

Yesterday, I wrote up a piece at the New York Times’ Room for Debate forum about the legacy that Tim Geithner left behind, given his recent memoir “Stress Test”. The question was : “Did the government miss a historic opportunity to reshape the financial system — or was its moderate approach correct?” I recommend you read the other answers from […]

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On Europe’s move toward QE to prevent deflation

There is a battle within the European Central Bank. Some want to take stronger action. Others do not think it is necessary. It is not just a matter of counting up who is on what side of the issue. It is not simply about majority rules. The ECB seeks consensus. As is well appreciated, there are important political and legal obstacles to buying European sovereign bonds.

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Ten lessons from Charles Keating on corporatism and control fraud

Ten lessons from Charles Keating on corporatism and control fraud

I knew Charles Keating, the head of Lincoln Savings, in my capacity as a financial regulator and as the subject of his wrath. His fraud schemes and the manner in which they targeted our system’s vulnerabilities in an era before Citizens United made the corruption of politicians by fraudulent CEOs child’s play remain the play book for the world’s most destructive financial frauds. Our failure to learn the ten lessons has caused immense suffering. Keating’s life, and the great harm he caused, will not have been in vain if we step back and use the occasion of his death to reflect on the changes we need to make.

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On the persistence of inadequate ideas like the money multiplier

On the persistence of inadequate ideas like the money multiplier

I have been saying for years now that the money multiplier does not adequately explain how money is created in a modern fiat money economy. In particular, the idea that banks are passive intermediaries who simply respond to injections of central bank money by creating more loans is fundamentally wrong. Banks actively determine the amount of “inside money” circulating in the economy. When they create loans or buy securities, inside money increases. When loans are repaid or written off, or securities are sold, inside money reduces. The constraints on bank lending are multiple and complex, and don’t include reserve availability (though the price of reserves is a constraint). The Bank of England’s description of the process is broadly accurate.

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Eurozone credit contraction continues

Eurozone credit contraction continues

Private loan balances in the euro area continue to decline. Last month’s drop of 2.2% from the previous year was worse than had been expected by economists.

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How money matters: The Old Lady fails to get an “A”

How money matters: The Old Lady fails to get an “A”

Andrea Terzi Dr. Terzi is a Professor of Economics at Franklin University Switzerland and a Research Associate with the Levy Economics Institute of Bard College. One thing’s for sure: The financial crisis has dealt a deadly blow to what was until recently considered the state-of-the-art of monetary policy. Just compare the 1992 edition of Modern Money Mechanics, published by the […]

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The BoE’s sharp shock to monetary illusions

The BoE’s sharp shock to monetary illusions

I’m doffing my cap to the researchers at Threadneedle Street for a new paper “Money creation in the modern economy,” which gives a truly realistic explanation of how money is created, why this really matters, and why virtually everything that economic textbooks say about money is wrong. The bank is going gangbusters to get its message across, with an introductory paper on what money is, and two short videos on what money is and money creation, both shot in its gold vault. It clearly wants economic textbooks to throw out the neat, plausible but wrong rubbish they currently teach about money, and connect with the real world instead.

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On the recovery in Europe’s periphery and loss socialization

On the recovery in Europe’s periphery and loss socialization

It’s not fashionable to be optimistic about Europe. But I have been a Europe bull since last April when we moved from the front-loaded austerity paradigm to a backloaded paradigm. And beginning in June 2013, I saw the data moving in that direction. Now the data now fully support this stance. But that’s the cyclical view. What about the macro secular story? Here the story is a bit more murky as it involves loss socialization, the continuing bank – sovereign nexus, and huge government debt burdens without the central bank backstop of a sovereign currency issuer.

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Banks shedding asset management businesses

Banks shedding asset management businesses

Here is a chart showing the number of transactions that involve acquisitions of an asset management business by year. It tells us about a couple of trends developing in recent years.

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