http://www.VoxEU.org Recent Willem Buiter articles on VoxEU.org en http://www.VoxEU.org/index.php?q=node/7646 Willem Buiter, 20 February 2012

Willem Buiter talks to Viv Davies about Greece and the Eurozone. Buiter believes that Greece’s public debt should be written off, it’s banks recapitalised and that the country be provided with sufficient conditional support to grow its economy. They discuss the LTROs and the risks of loss of control over the aggregate size of the balance sheet and potential national central bank insolvencies. Buiter suggests that now is not the time for self-righteousness amongst European policymakers. The interview was recorded on 17 Feb 2012. [Also read the transcript]

Full Article: Greece and the Eurozone: Political leaders should get off their high horses]]> Mon, 20 Feb 2012 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/7646 http://www.VoxEU.org/index.php?q=node/7533 Willem Buiter, 16 January 2012

The global crisis inaugurated a new era for central banks in the advanced economies, when their conventional role as interest rate-setters and lenders and market makers of last resort expanded. Central banks have become the custodians of stability for financial markets – a role for which they lack both democratic accountability and political legitimacy, argues Willem Buiter in DP8780. He decries the new “perverse division of labour” between central banks and fiscal authorities and appeals for a reassessment of this pathological arrangement.

Full Article: The role of central banks in financial stability: How has it changed?]]> Mon, 16 Jan 2012 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/7533 http://www.VoxEU.org/index.php?q=node/6944 Willem Buiter, Juergen Michels, Ebrahim Rahbari, 6 September 2011

The Eurozone money transfer system, TARGET2, has huge imbalances whose meaning is subject to much debate. This Policy Insight by Citigroup Chief Economist Willem Buiter and co-authors argues that the imbalances show some banks can’t fund themselves without public support.

Full Article: The implications of intra-euro area imbalances in credit flows]]> Tue, 06 Sep 2011 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/6944 http://www.VoxEU.org/index.php?q=node/6945 Willem Buiter, Juergen Michels, Ebrahim Rahbari, 6 September 2011

The Eurozone money transfer system, TARGET2, has huge imbalances whose meaning is subject to much debate. This column introduces a new CEPR Policy Insight by Citigroup Chief Economist Willem Buiter and co-authors that sorts out the issues. It argues that the imbalances show some banks can’t fund themselves without public support. This is a wakeup call – Eurozone banking systems must rapidly be put on sound footing.

Full Article: Making sense of TARGET imbalances]]> Tue, 06 Sep 2011 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/6945 http://www.VoxEU.org/index.php?q=node/6698 Willem Buiter, Ebrahim Rahbari, 28 June 2011

The strong-dollar rhetoric of the US government contrasts with a weak-dollar reality. This column argues that talking a strong-dollar talk while walking a weak-dollar walk has damaged the reputational capital of the US monetary and fiscal authorities. That has reduced their ability to use statements of intent or announcements of future policy actions to influence markets.

Full Article: The ‘strong-dollar’ policy of the US]]> Tue, 28 Jun 2011 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/6698 http://www.VoxEU.org/index.php?q=node/6374 Willem Buiter, Ebrahim Rahbari, 22 April 2011

Which countries will drive growth for the next 40 years? This column introduces a new Policy Insight in which Citi economists Willem Buiter and Ebrahim Rahbari investigate the likely future sources of global economic growth between 2010 and 2050. They come up with 11 global growth generators, i.e. 11 3Gs. Surprisingly, Brazil and Russia do not make the cut while two Africans countries are in.

Full Article: Global growth generators: Moving beyond emerging markets and BRICs]]> Fri, 22 Apr 2011 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/6374 http://www.VoxEU.org/index.php?q=node/6375 Willem Buiter, Ebrahim Rahbari, 22 April 2011

Which countries will drive growth for the next 40 years? In Policy Insight 55 Citi economists Willem Buiter and Ebrahim Rahbari investigate the likely future sources of global economic growth between 2010 and 2050.

Full Article: Global growth generators: Moving beyond emerging markets and BRICs]]> Fri, 22 Apr 2011 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/6375 http://www.VoxEU.org/index.php?q=node/5665 Willem Buiter, Ebrahim Rahbari, 12 October 2010

CEPR Policy Insight No.51 explains how and why the fiscal crisis in the Eurozone came about and how it is likely to evolve during the rest of this decade.

Full Article: Greece and the fiscal crisis in the Eurozone ]]> Tue, 12 Oct 2010 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/5665 http://www.VoxEU.org/index.php?q=node/3333 Willem Buiter, 8 May 2010

First published on 24 March 2009, this column is more relevant than ever. In it Willem Buiter argues that the ECB’s lack of fiscal backing is both unusual among major central banks and a severe handicap – it is a factor in why the ECB is “fiddling while the Eurozone burns” by hesitating to undertake quantitative easing started by the Fed, Bank of England, and others.

Full Article: The European fiscal vacuum makes the ECB timid on quantitative and credit easing ]]> Sat, 08 May 2010 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3333 http://www.VoxEU.org/index.php?q=node/3626 Willem Buiter, 4 June 2009

Some economists are arguing that central banks should set negative nominal interest rates. This column explains the basics by describing three ways of removing the zero lower bound on nominal interest rates: abolish currency, tax currency holding, or decouple the unit of account from the currency by introducing a new currency.

Full Article: The wonderful world of negative nominal interest rates]]> Thu, 04 Jun 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3626 http://www.VoxEU.org/index.php?q=node/3513 Willem Buiter, 29 April 2009

Is the global economy turning around? Analysing the situation across the globe, this column concludes that the only reasonably convincing evidence of ‘green shoots’ comes from China – but even that recovery is unlikely to be sustainable due to China's dependency on exports. A global flu pandemic, if it were to occur, would act as a negative supply and demand shock.

Full Article: The global recession has not turned the corner]]> Wed, 29 Apr 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3513 http://www.VoxEU.org/index.php?q=node/3340 Willem Buiter, 25 March 2009

The third column in this series discusses the ECB’s lack of fiscal backing in detail and suggests three ways in which it might be provided by EU governments.

Full Article: The fiscal hole at the heart of the Eurosystem]]> Wed, 25 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3340 http://www.VoxEU.org/index.php?q=node/3341 Willem Buiter, 25 March 2009

The last column in this series on fiscal aspects of central banking reviews the differences in fiscal backing for the Bank of England, the US Federal Reserve, and the European Central Bank.

Full Article: How much fiscal backing do the key central banks have?]]> Wed, 25 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3341 http://www.VoxEU.org/index.php?q=node/3334 Willem Buiter, 24 March 2009

The second of this four-column series on fiscal aspects of central banking discusses the institutional constraints on quantitative easing. It argues that the ECB can and should engage in quantitative easing since its independence gives it a credible non-inflationary exit strategy. The Fed, however, seems heading for a bout of inflation stemming from Congressional pressure. Buiter argues that the Bank of England’s situation lies between.

Full Article: Why no quantitative or credit easing in the Eurozone?]]> Tue, 24 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3334 http://www.VoxEU.org/index.php?q=node/3264 Willem Buiter, 14 March 2009

Zombie banks need fixing. Good Bank and Bad Bank solutions are the leading contenders. This column reviews the implications for distributional, incentive, and financial stability effects. It argues that too-big-too-fail bank should immediately be taken into public ownership and restructured decisively through a mandatory debt-to-equity conversion or debt write-down. The Fed and Treasury have been captured by save-unsecured-creditors reasoning pushed by special interest groups.

Full Article: Zombie solutions: The Good Bank vs Bad Bank approaches]]> Sat, 14 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3264 http://www.VoxEU.org/index.php?q=node/3232 Willem Buiter, 9 March 2009

Financial regulation is a now-or-never proposition as the sector’s lobbying power is greatly diminished. This column argues that we should embrace robust regulation now, risking over-regulation. Correcting mistakes later would be better than risking another era of “self-” or “soft-touch” regulation.

Full Article: Regulate financial markets while we still can]]> Mon, 09 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3232 http://www.VoxEU.org/index.php?q=node/3210 Willem Buiter, 6 March 2009

Standard macroeconomic theory did not help foresee the crisis, nor has it helped understand it or craft solutions. This columns argues that both the New Classical and New Keynesian complete markets macroeconomic theories not only did not allow the key questions about insolvency and illiquidity to be answered. They did not allow such questions to be asked. A new paradigm is needed.

Full Article: Macroeconomics’ crisis of irrelevance]]> Fri, 06 Mar 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3210 http://www.VoxEU.org/index.php?q=node/3104 Willem Buiter, 20 February 2009

It looks like capital controls for central and eastern European countries as well as emerging markets everywhere. This column argues that imposing capital outflow controls – while sometimes unavoidable – discourages future capital inflows and creates rents. This is why they should be explicitly made temporary.

Full Article: The return of capital controls]]> Fri, 20 Feb 2009 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/3104 http://www.VoxEU.org/index.php?q=node/2498 Willem Buiter, Anne Sibert, 30 October 2008

In the first half of 2008, Buiter and Sibert were invited to study Iceland’s financial problems. They identified the “vulnerable quartet” of (1) a small country with (2) a large banking sector, (3) its own currency and (4) limited fiscal capacity – a quartet that meant Iceland’s banking model was not viable. How right they were. This column summarises the report, which is now available as CEPR Policy Insight No. 26 with an October 2008 update.

Full Article: Iceland’s banking collapse: Predicable end and lessons for other vulnerable nations]]> Thu, 30 Oct 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/2498 http://www.VoxEU.org/index.php?q=node/2504 Willem Buiter, Anne Sibert, 29 October 2008

According to the authors of CEPR Policy Insight No. 26, Iceland has two options: either join the EU and EMU and keep its international banking activities domiciled in Iceland, or retain its own currency and move its foreign currency banking activities to the euro area

Full Article: The Icelandic banking crisis and what to do about it ]]> Wed, 29 Oct 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/2504 http://www.VoxEU.org/index.php?q=node/1729 Alberto Alesina, Richard Baldwin, Tito Boeri, Willem Buiter, Francesco Giavazzi, Daniel Gros, Stefano Micossi, Guido Tabellini, Charles Wyplosz, Klaus F. Zimmermann, 1 October 2008

This is a once-in-a-lifetime crisis. Trust among financial institutions is disappearing; fear may spread. Last week’s US experience showed that saving one bank at a time won’t work. A systemic response is needed and in Europe this means an EU-led initiative to recapitalise the banking sector. Unless European leaders immediately unite to address this crisis before it spirals out of control, they may find themselves fighting over how best to salvage the aftermath.

Full Article: Open Letter to European leaders on Europe’s banking crisis: A call to action]]> Wed, 01 Oct 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/1729 http://www.VoxEU.org/index.php?q=node/1706 Willem Buiter, 25 September 2008

The Paulson Plan addresses market illiquidity for toxic assets but the real problem is a lack of bank capital and the risk of widespread insolvency. Fixing this requires a government injection of new bank capital or a forced conversion of bank debt into equity. This column argues against the former as it would further socialise the US financial system. The Package needs some work, but Congress must stop its infantile posturing and act soon.

Full Article: The Paulson Plan: A useful first step but nowhere near enough]]> Thu, 25 Sep 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/1706 http://www.VoxEU.org/index.php?q=node/1410 Willem Buiter, 18 July 2008

Willem Buiter talks to Romesh Vaitilingam about the financial crisis, the global cyclical slowdown and the rise of inflation. He discusses central banks’ responses to the credit crunch and calls on them to tighten monetary policy to counter the inflationary threat.

Full Article: Central banks, the financial crisis and the threat of inflation]]> Fri, 18 Jul 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/1410 http://www.VoxEU.org/index.php?q=node/1155 Willem Buiter, 17 May 2008

In CEPR Policy Insight No.24, Willem Buiter asks: Does it matter if a central bank suffers a large capital loss? Can the central bank become insolvent? How and by whom should the central bank be recapitalised, should its capital be deemed insufficient?

Full Article: Can Central Banks Go Broke?]]> Sat, 17 May 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/1155 http://www.VoxEU.org/index.php?q=node/986 Willem Buiter, 13 March 2008

Loan defaults create financial losers and winners, but the losses are highly concentrated in highly visible financial institutions while the winners are dispersed among millions of mortgage-holders that have been written down or written off. Here is a discussion how the subprime crisis has created winners and what it means for analysis of this unfolding situation.

Full Article: Subprime winners]]> Thu, 13 Mar 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/986 http://www.VoxEU.org/index.php?q=node/964 Willem Buiter, 5 March 2008

This second column on the Treasury Committee’s report on lessons from Northern Rock discusses the institutional arrangements needed to cope should a bank of non-trivial size fail.

Full Article: Lessons from Northern Rock: How to handle failure]]> Wed, 05 Mar 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/964 http://www.VoxEU.org/index.php?q=node/960 Willem Buiter, 4 March 2008

The UK Treasury Committee recently released a report on the lessons from the plight of Northern Rock. In the first of a two-column series, Willem Buiter analyses the shortcomings of the report’s recommendations for reducing problems in the banking and ‘shadow banking’ sectors.

Full Article: Lessons from Northern Rock: Banking and shadow banking]]> Tue, 04 Mar 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/960 http://www.VoxEU.org/index.php?q=node/953 Willem Buiter, Anne Sibert, 26 February 2008

Barack Obama, the likely Democratic presidential candidate, has proposed tax breaks for US corporations that invest at home rather than abroad. This column argues that his proposal is protectionist, reactionary, and economically unsound.

Full Article: The dangerous protectionism of Barack Obama]]> Tue, 26 Feb 2008 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/953 http://www.VoxEU.org/index.php?q=node/830 Willem Buiter, 19 December 2007

What caused the current North Atlantic financial crisis, how can it be fixed and how can the likelihood of future crises be reduced? This column introduces a new CEPR Policy Insight, 'Lessons from the 2007 Financial Crisis', which addresses these issues at length.

Full Article: Lessons from the North Atlantic financial crisis]]> Wed, 19 Dec 2007 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/830 http://www.VoxEU.org/index.php?q=node/857 Willem Buiter, 19 December 2007

What caused the current North Atlantic financial crisis, how can it be fixed and how can the likelihood of future crises be reduced? CEPR Policy Insight No. 18 addresses these issues at length.

Full Article: Lessons from the 2007 Financial Crisis ]]> Wed, 19 Dec 2007 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/857 http://www.VoxEU.org/index.php?q=node/522 Willem Buiter, 3 September 2007

A rate cut is unnecessary. Congress will swiftly augment the Bush bail-out, adding a fiscal stimulus worth, say, 0.5% of GDP. The anticipation of relief on both the fiscal and monetary side is likely to be enough to normalise credit conditions.

Full Article: Subprime crisis: What to think about the Bush and Bernake performance]]> Mon, 03 Sep 2007 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/522 http://www.VoxEU.org/index.php?q=node/481 Willem Buiter, Anne Sibert, 18 August 2007

The Fed’s 17-8-07 move was a missed opportunity. It should have effectively created a market by expanding the set of eligible collateral, charging an appropriate "haircut" or penalty interest rate, and expanding the set of eligible borrowers at the discount window to include any financial entity that is willing to accept appropriate prudential supervision and regulation.

Full Article: Subprime crisis unfolds: What the Fed should have done instead]]> Sat, 18 Aug 2007 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/481 http://www.VoxEU.org/index.php?q=node/459 Willem Buiter, Anne Sibert, 13 August 2007

Last week's actions by the ECB, the Fed and the Bank of Japan were not particularly helpful – a classic example of trying to manage a credit crisis or liquidity squeeze using the tools suited to monetary policy-making in orderly markets. Monetary policy is easy; preventing or overcoming a financial crisis is hard; managing the exit from a credit squeeze without laying the foundations for the next credit and liquidity explosion is harder still. Central bankers should earn their keep by acting as market makers of last resort.

Full Article: Subprime 'crisis': What Central Bankers should do and why]]> Mon, 13 Aug 2007 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/459 http://www.VoxEU.org/index.php?q=node/207 Willem Buiter, Anne Sibert, 3 May 2006

The Maastricht Treaty’s Eurozone entry criteria were designed for slow-growing West European nations. They make no economic sense for the new EU members. These nations opted for stable exchange rates, so their inflation rates rose with energy prices and rapid productivity growth. Neither the ECB nor the Bank of England would try to control inflation and exchange rates simultaneously. Why should Eurozone aspirants be forced to do so?

Full Article: The euro’s inflation test]]> Wed, 03 May 2006 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/207