The (other) deleveraging: What economists need to know about the modern money creation process

Manmohan Singh, Peter Stella 02 July 2012

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One of the financial system’s chief roles is to provide credit for worthy investments. Some very deep changes are happening to this system – changes that surprisingly few people are aware of. This column presents a quick sketch of the modern credit creation and then discusses the deep changes are that are affecting it – what we call the ‘other deleveraging’.

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Topics:  Macroeconomic policy

Tags:  monetary policy, Central Banks, money multiplier, Pledged collateral, re-pledging, private money creation

Hume on hold?

Michael Burda 17 May 2012

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The great Scottish philosopher and economist David Hume understood all too well how national boundaries and balance-of-payment statistics affect and even determine flows of international trade. Where national boundaries exist, customs offices and government bureaucracies assiduously monitor the flow of goods and assets between countries. Surpluses and deficits are seen by politicians as a sign of national pride or shame. Hume criticised the mercantilist view but was optimistic that trading patterns would ultimately right themselves. In 1752 he wrote:

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Topics:  EU institutions International finance

Tags:  Central Banks, balance of payments, David Hume

Central Bank reserve creation in the era of negative money multipliers

Manmohan Singh, Peter Stella 07 May 2012

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The phenomenal increase in bank reserves that has resulted from central bank responses to the current financial crisis has led to considerable anxiety regarding a potentially explosive and uncontrollable future increase in inflation. Virtually identical concerns within the Federal Reserve in late 1935 motivated large increases in reserve requirements during 1936 and 1937; actions widely regarded as contributing to the sharp 1937-8 recession (see Friedman and Schwartz 1963).

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Topics:  Macroeconomic policy

Tags:  monetary policy, Central Banks, reserves, money multiplier

Central banks and gold puzzles

Joshua Aizenman, Kenta Inoue 19 March 2012

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On 7 August 2009, the European Central Bank released the following Joint Statement on Gold:

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Topics:  International finance

Tags:  Central Banks, reserves, Gold

The role of central banks in financial stability: How has it changed?

Willem Buiter,

Date Published

Mon, 01/16/2012

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Central banks’ voting records and future policy

Kateřina Šmídková, Jan Zapal, Roman Horváth 13 November 2011

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Monetary-policy transparency has several dimensions, such as volume, quality, and timeliness of disclosed information. Transparency-cautious central banks typically release the voting records from monetary-policy meetings together with the minutes. Ideally, these voting records should help external observers better understand monetary policy, as argued by Geraats et al (2008) in the case of the ECB. In other words, they should be informative about future monetary policy.

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Topics:  Macroeconomic policy Monetary policy

Tags:  monetary policy, transparency, Central Banks

When markets freeze: Tobin’s q and QE

Marcus Miller, John Driffill 27 September 2011

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The economies of the North Atlantic look in poor shape. But it could be worse. Central banks have been doing their best to save capitalism from its own self-fulfilling fears, using the policy of quantitative easing to take frozen assets onto their balance sheets until confidence returns. Why they are doing this – and why it matters – can best be seen in the light of history.

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Topics:  Global crisis Monetary policy

Tags:  monetary policy, Central Banks, Great Depression, global crisis, quantitative easing

Procyclical bank risk-taking and the lender of last resort

Mark Mink 31 August 2011

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Since the outbreak of the global financial crisis in 2007, and particularly since the bankruptcy of Lehman brothers in September 2008, central banks in their roles as lenders of last resort have provided large-scale liquidity support not only to individual banks, but also to the banking sector as a whole. As President Trichet of the European Central Bank explained in November 2009:

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Topics:  International finance Macroeconomic policy

Tags:  Central Banks, lender of last resort, financial regulation

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

Shell game: Zero-interest policies as hidden subsidies to bank

Axel Leijonhufvud 25 January 2011

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The two pioneers of modern monetary economics – Irving Fisher and Knut Wicksell – were passionately concerned to find monetary arrangements that would insure against arbitrary redistributions of income and wealth. They saw such distributive effects as offenses against social justice and consequently as a threat to social and political stability. 

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Topics:  Financial markets Monetary policy

Tags:  monetary policy, Central Banks, zero interest rates

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