TARGET balances, Bretton Woods, and the Great Depression

Michael Bordo 21 March 2014

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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.

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Topics:  Economic history International finance

Tags:  ECB, eurozone, euro, global imbalances, Central Banks, financial crisis, Great Depression, Eurosystem, Eurozone crisis, Bretton Woods, TARGET

TARGET2 as a scapegoat for German errors

Paul De Grauwe, Yuemei Ji 02 November 2012

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The accumulation of TARGET2 balances (claims and liabilities) has two possible sources, current account imbalances and capital flows (Buiter et al. 2011). Thus, Germany’s accumulated TARGET2 claims of approximately €800 billion must be the result of a combination of current account surpluses and capital inflows. This is a matter of definition.

Disagreement arises from the nature of the risk that these TARGET2 claims imply for Germany (Sinn 2012, De Grauwe and Ji 2012). Let me discuss this risk by first concentrating on the German current accounts and then on capital inflows.

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Topics:  EU institutions

Tags:  TARGET, TARGET2, EZ breakup

TARGET losses in case of a euro breakup

Hans-Werner Sinn 22 October 2012

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When exchange rate adjustments are impossible, imbalances of cross-border payment flows must be accommodated officially. This baseline fact about monetary union has sparked extensive discussion on what the resulting asset positions mean (Sinn 2011a,b, Tornell and Westermann 2012, Whelan 2012).

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Topics:  EU institutions

Tags:  Eurozone breakup, TARGET, TARGET2

German savers should applaud the growing TARGET balances

Sebastian Dullien, Mark Schieritz 07 May 2012

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The European debt crisis has led to increasing imbalances between Eurozone central banks, which then show up in the TARGET system (also known as the TARGET2 system). The causes and consequences of this phenomenon are the subject of a vivid and controversial debate (Sinn and Wollmerhäuser 2011, Buiter et al 2011, Merler and Pisani-Ferry 2012).

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Topics:  EU policies Europe's nations and regions

Tags:  Germany, Eurozone crisis, TARGET, TARGET2

Eurosystem TARGET balance deviations call for cautious changing of the EU banking landscape

Ossi Leppänen 18 April 2012

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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.

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Topics:  EU policies International finance Monetary policy

Tags:  financial regulation, Eurosystem, Eurozone crisis, TARGET

TARGET imbalances: Financing the capital-account reversal in Europe

Ashoka Mody, Fabian Bornhorst 07 March 2012

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There is a fierce ongoing debate over the so-called TARGET claims in the Eurozone. TARGET balances are the mechanism through which national central banks within the Eurosystem lend to each other. TARGET positions are intended to smooth over temporary liquidity needs of the member countries and the system is typically close to balanced. Since 2007, however, imbalances have grown steadily and as of this writing Germany has a large creditor position, while a number of countries have become net debtors (Figure 1).

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Topics:  EU policies Europe's nations and regions International finance

Tags:  Eurozone crisis, TARGET, TARGET2

Eurozone Crisis, Act Two: Has the Bundesbank reached its limit?

Aaron Tornell, Frank Westermann 06 December 2011

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Act Two in the unfolding Eurozone drama begins this week as leaders at the European summit announce emergency measures to prevent further market turmoil. Why the sudden urgency? Because the German Bundesbank is about to exhaust its capacity to lend more funds to strapped governments.

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Topics:  EU policies Europe's nations and regions Monetary policy

Tags:  ECB, Eurozone crisis, TARGET

A balance sheet view on TARGET – and why restrictions on TARGET would have hit Germany first

Clemens Jobst 19 July 2011

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By now most readers of European financial newspapers and blogs will have come across Hans-Werner Sinn’s repeated assertions (see Sinn 2011a and 2011b on this site and his latest here) about Germany’s “stealth bailout” of European peripheral economies and the “ticking time bomb” hidden in the €300 billion claims of the Bundesbank in the Eurozone payment system

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Topics:  EU policies Europe's nations and regions International finance

Tags:  Germany, ECB, Bundesbank, Central Banks, Eurozone crisis, TARGET

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