Sergio Cesaratto’s Debate With Marc Lavoie On Whether The Euro Area Crisis Is A Balance-Of-Payments Crisis – II

14 September 2015

This is a continuation of the post from the end of 2014, although reading that isn’t necessary.  In a new paper, Marc Lavoie continues his debate with Sergio Cesaratto on whether the Euro Area crisis is a balance-of-payments crisis or not. For the sake of completeness, here’s the list of papers, with references copy-pasted from Marc’s […]


JKH On Paul De Grauwe’s Fiscal Arithmetic

21 January 2015

In a recent article for VOX, Paul De Grauwe and Yuemei Ji write about potential fiscal effects of a possible asset purchase program by the Eurosystem (European Central Bank and the National Central Banks in the Euro Area). In that the authors take an extreme stand suggesting that a default by a Euro Area government […]


Money Supposedly Became Fiat And Hence Balance Of Payments Does Not Matter Kind Of Argument

20 November 2012

So Karl Whelan wrote another article on TARGET2 claiming once more that a loss of TARGET2 claims of the Bundesbank does not matter at all to Germany. He has a new paper as well. Earlier he was arguing there was no loss at all. His argument roughly is that since there is no longer trade […]


Why Paul De Grauwe Is Wrong About TARGET2

17 September 2012

The financial and non-financial resources at the disposal of an institutional unit or sector shown in the balance sheet provide an indicator of economic status. These resources are summarized in the balancing item, net worth. Net worth is defined as the value of all the assets owned by an institutional unit or sector less the value of all its outstanding […]


OMT! Enter The Draghi

6 September 2012

As leaked earlier by Bloomberg, Mario Draghi in a press conference today, presented his big plan to save the world. This will involve OMTs (Outright Monetary Transactions) – in which a Euro Area nation central government requesting aid from the EFSF/ESM will also be provided help by the ECB. Under this plan, when a nation’s […]


TARGET2 And Capital Outflows

21 June 2012

This is a note by Eladio Febrero Panos sent to me by Sergio Cesarrato. by Eladio Febrero Paños Area de Teoria Economica, Facultad de Economicas, UCLM Pza Universidad no. 1, 02071 Albacete, Spain Let us assume the following initial situation. There are two private banks, one in Spain (SPB) and another one in Germany (GPB); we […]


Is Intra-Eurosystem Debt Unconstitutional? [Updated 2]

19 June 2012

There’s an interesting conversation between JKH and Marshall Auerback here on the constitutionality of TARGET2 balances of the NCBs of the Euro Area. Rather than intervene in the comments, I thought I will let them exchange comments because I am not sure why Marshall Auerback thinks these are unconstitutional and more generally where he is headed […]


Downplaying TARGET2 Imbalances

13 June 2012

Beate Reszat has written a very nice article on TARGET2 Target2 – Q&A which should be read by anyone interested. The article seems to be in response to a speech by George Soros earlier this month in Italy. The link appears in her post and the relevant section of the transcript quoted. Although it is a […]


Peter Garber From 1998 On TARGET

5 June 2012

In exchange rate agreements and arrangements such as the ERM I and II, central banks would risk running out of foreign reserves in case of a speculative attack on the currency. They may commit to each other on defending the exchange rate but in extreme cases, the agreements may lose their significance. When I saw […]


Spanish Banks, Banco de España & TARGET2

15 May 2012

In two big operations in December and February, the Eurosystem lent around €1tn to banks in the Euro Area: (click to expand, source: ECB) Spanish banks it seems borrowed around €315bn (gross) as per the recently the Banco de España released statistic Financing In The Eurosystem (April 2012): (click to expand) Due to the continuing capital flight out […]