On Thursday the ECB’s Governing Council will decide on whether to start a large bond buying program. I am afraid the decision is clear, though not for economic reasons. A few days later, the Greek will probably vote for a left leaning government under the Syriza-party, which wants to renegotiate the terms of the huge government debt, and is opposed to the EU-imposed austerity program which impoverished the country. There will be a standoff, a game of chicken, in which Brussels, Frankfort (the ECB) and Berlin
At the meeting of the Shadow ECB Council on 26 September, 2014, there was a strong consensus that strong disinflation and weak economic prospects warranted ECB action. At the same time, there was near consensus that the package of measures announced by the central bank in early September would not be sufficient and there was disagreement on their appropriateness. Many members suggested large scale
At the meeting of the Shadow ECB Council on 26 June, 2014, there was a strong consensus that the measures decided by the ECB Governing Council in early June against the credit crunch and below target inflation were going in the right direction, but only modestly effective and insufficient. Almost all members believed that additional measure were needed now or in the near future. The Targeted Long Term Refinancing Operations (TLTRO) were almost unanimously considered the most important part of
The Shadow ECB Council held a conference-call on 27 March, 2014 to discuss whether and which monetary policy measure would be appropriate to deal with the continued inflation undershoot and to counter the threat of deflation. There was broad consensus that the low and declining inflation rate in the euro area as a whole and negative rates in some individual countries pose a serious problem; more serious than ECB representatives
Let’s assume that there is a financial oligarchy which exerts strong political influence due to the vast amounts of money it controls. Let’s further assume that this financial oligarchy has succeeded in having financial markets deregulated and that this has enabled the financial industry to expand their business massively. Then, in some near or far future, their artfully constructed financial edifice breaks down, because it cannot be hidden any more that the accumulated claims cannot be serviced by the real economy.
A working paper published by the European Central Bank (ECB) shows that strong wage increases have not been the cause for troubles of the euro zone’s crisis countries. Rather, capital flows have caused bloated house and asset prices and exaggerated construction activity and unsustainable economic activity in general, which in turn has pushed up wages. This diagnosis flies in the faceof the of the story often retold by the ECB and
Outstanding credit to the private sector in the euro area has been shrinking for a long time. It is shrinking fast in several peripheral countries and the European Central Bank (ECB) seems unable or unwilling to do anything about it. Given that the economy of the euro area is barely crawling out of recession and that inflation is predicted to be significantly below the central bank's target rate for the next two years at least, this seems troublesome. Two economists of the Bank for International Settlements (BIS) help out
Fabian Lindner of the German macro-economic research institute IMK has submitted a very timely and well-argued piece to the World Economic Reviw: “Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory”. He takes on influential theses of luminaries from Larry Summers, over Ben Bernanke to Hans-Werner Sinn by tracing them back to the loanable-funds-fallacy - a fallacy which still rules standard textbooks. His main proposition is simple and not refutable: firms and economies do not operate at full capacity. All research and surveys show that