TARGET balances, Bretton Woods, and the Great Depression
Michael Bordo 21 March 2014
Since 2007, there has been a buildup of TARGET imbalances within the Eurosystem – growing liabilities of national central banks in the periphery matched by growing claims of central banks in the core. This column argues that, rather than signalling the collapse of the monetary system – as was the case for Bretton Woods between 1968 and 1971 – these TARGET imbalances represent a successful institutional innovation that prevented a repeat of the US payments crisis of 1933.
During the Eurozone crisis, an analogy was made between the events in Europe between 2007 and 2012 and the collapse of the Bretton Woods System between 1968 and 1971. There has been a build-up of TARGET liabilities since 2007 by some central banks (notably Greece, Ireland, Portugal, and Spain, or the ‘GIPS’), and of TARGET assets by Germany and others.
Economic history International finance
ECB, eurozone, euro, global imbalances, Central Banks, financial crisis, Great Depression, Eurosystem, Eurozone crisis, Bretton Woods, TARGET
Eurosystem TARGET balance deviations call for cautious changing of the EU banking landscape
Ossi Leppänen 18 April 2012
Since the start of the crisis the Eurosystem balance sheet has grown from €1200 billion in June 2007 to around €2900 billion in March 2012. But this is spread unevenly among different central banks within the Eurozone, raising the thorny issue of intra-area (TARGET) balances. This column argues that these balances signal a need for change and restructuring in the Eurozone banking sector.
In the monetary policy analysis only the consolidated balance sheet of the Eurosystem is relevant. In a decentralised central banking system individual national central banks’ balance sheets are relevant when assessing banks’ short-term financing needs vis-à-vis each of the national central banks. Apart from this, the decentralised system also opens the tricky issue of intra-area (TARGET) balances.
EU policies International finance Monetary policy
financial regulation, Eurosystem, Eurozone crisis, TARGET
Fiscal dimensions of central banking: the fiscal vacuum at the heart of the Eurosystem and the fiscal abuse by and of the Fed: Part 3
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.
An entirely valid reason for the ECB/Eurosystem to refuse to engage in either outright purchases of private securities or in unsecured lending to the banking sector (or to the non-financial enterprise sector directly), is that there is no ‘fiscal Eurozone’ – just as there is no fiscal EU. The absence of a fiscal Europe that matters here is a narrow one.
ECB, Eurosystem, fiscal Europe, wnt
Fiscal dimensions of central banking: The fiscal vacuum at the heart of the Eurosystem and the fiscal abuse by and of the Fed: Part 1
Willem Buiter 08 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.
Editors’ note: This is the first of a four-part series of Vox columns culled from Willem Buiter’s recent post on his FT-sponsored blog, Maverecon.
ECB, Eurosystem, quantitative easing