November 2011

The Eurosystem: Part 3

30 November 2011

In the previous post in this series The Eurosystem: Part 2, I discussed cross-border flows within the Euro Area. With exceptions, most of these flows are current balance of payments and balance of payments financing flows. Of course there are other flows with the world outside the EA17 and these flows flow via the correspondent banking […]


Charts From OECD’s Economic Outlook

29 November 2011

The OECD released its Economic Outlook recently. The preview is available here but download is for subscribers. Else if you are an FT subscriber, you can get it from FT Alphaville’s Long Room. A few interesting charts (at least for me): (click to enlarge) Most Economists (except a few good ones), following the work of […]


UK’s Assets Held In The Euro Area

27 November 2011

The UK Office of National Statistics released the 2011 editions of the “Blue Book” and the “Pink Book” recently. The UK Gross Domestic Product was £1,394 billion in 2009 and £1,458 billion in 2010. In the last 20-40 years, external assets (and liabilities) have grown to a huge multiples of GDP. Hyman Minsky worried about gross assets […]


An Internal Balance Of Payments Crisis

26 November 2011

Economists are increasingly recognizing the Euro Area problems as a balance-of-payments crisis, in addition to realizing that the Euro Area national governments cannot finance their deficits by making a draft at the Eurosystem in extreme emergency. The Economist has an article today Beware of falling masonry with the graph on the net asset position which I […]


Krugman, Wolf And Goodhart

25 November 2011

Paul Krugman has a blog  post today titled Death By Accounting Identity, commenting on Martin Wolf’s FT Article Why cutting fiscal deficits is an assault on profits, where Wolf talks about the sectoral balances identity made famous by Wynne Godley. I guess the better way to put it is that Martin Wolf is trying to make the […]


Yesterday’s Auction Fail

24 November 2011

I had some discussions with someone on yesterday’s post Today’s Auction Fail, which led me to find out how the German Finance Agency acting for the account of the German Government, through the Deutsche Bundesbank acted with confidence in rejecting a good proportion of bids in yesterday’s auction. It seems, the German government holds a […]


Today’s Auction Fail

23 November 2011

Big deal has been made out of today’s auction of 2022 bonds of the Federal Republic of Germany. How it affects the markets or will in the near future is not the point of discussion here. Rather, this post has to do with some misleading description given by Izabella Kaminska of FT Alphaville. Izabella is […]


Will The Incredible Lacuna Be Rectified?

19 November 2011

In 1992, Wynne Godley wrote a terrific London Review of Books article Maastricht And All That pinpointing the exact defect in the Maastricht Treaty. He wrote about an “incredible lacuna”: … The incredible lacuna in the Maastricht programme is that, while it contains a blueprint for the establishment and modus operandi of an independent central bank, […]


The Eurosystem: Part 2

19 November 2011

In a post last week – The Eurosystem: Part 1, I went into the Euro Area payment system TARGET2 and touched upon domestic payments and implementation of monetary policy in the Euro Area. This post takes off from their to discuss cross-border flows. There are two reasons for looking into this is: to understand the flow-of-funds […]


An NIIP Prism

18 November 2011

Alastair Marsh at FT Alphaville discusses the Euro Area problems looked through the prism of net international investment position (NIIP), quoting Goldman Sachs economist Lasse Holboell Nielsen: When considering the causes of the ongoing Euro area debt crisis, it is natural to focus on public debt and deficits as the primary sources of market tensions. However, as […]