Draghi’s dance on negative rates isn’t over 8 Mar 2013 The ECB chief played down hopes of cutting rates below zero, stressing “serious” risks. It could punish cash-rich banks and may not lead to more lending in the context of the Italian crisis. But if the euro shoots up, talk of negative rates may return.
Mervyn King’s RBS bad bank plan is just bad 6 Mar 2013 The outgoing Bank of England governor’s call for RBS to be split could enable its better part to be sold more quickly. But it could also require a big injection of public cash without delay. Since the bank’s restructuring is almost complete, this is hard to justify.
Ethical economy: Morality and monetary policy 6 Mar 2013 Central bankers think of themselves as financial technocrats. But ethical analysis could have helped them avoid the financial crash and today’s abnormal policies. Freedom to lend and borrow is not an absolute good, and the greed of bankers and borrowers is a dangerous evil.
UK lending subsidy: politics 0, economics 1 4 Mar 2013 British banks trebled usage of the Bank of England’s cheap funding scheme in the fourth quarter, but net lending shrank. The initiative seems to be helping big banks more than small businesses. Politically, it’s embarrassing. Economically, it’s still a good outcome.
All together now, central banks do not go bust 1 Mar 2013 The Federal Reserve and other central banks with bloated balance sheets will book losses when interest rates rise. But the red ink can’t bleed them dry. Ben Bernanke and other policymakers need to hammer this point home to keep away economically unnecessary political trouble.
BOJ chief could score early win by dumping rule 28 Feb 2013 The Bank of Japan’s self-imposed limit on government bond holdings is past its sell-by date. Haruhiko Kuroda, the likely next governor, could deliver a quick boost to monetary easing by dropping the restriction. Doing so would allay fears of a spike in long-term yields.
BoE tempted to turn to futile policy options 27 Feb 2013 The UK central bank’s deputy governor has suggested prodding lending-shy banks into action by charging them to park money safely. Negative rates may make sense in theory. But outside the ivory tower, aggressive pushes on the monetary string will only tie the economy into knots.
Carney calls for trustworthy banking. Good luck… 26 Feb 2013 The next Bank of England governor gave a strong speech in London, Ontario on the need for virtue in an industry that rather relies on trust. But his fine words won’t be heard in London, England. That requires something more like a conversion - which is not in sight.
Why Kuroda is a better choice for BOJ chief 25 Feb 2013 The next central bank head will have to print money aggressively and defend a weak yen vigorously. ADB chief Haruhiko Kuroda’s diplomatic savvy and readiness to take risks make him a better choice than previous favourite Toshiro Muto, whose BOJ record did not inspire confidence.
Gold melts as economy warms and Fed warns 21 Feb 2013 The price of the yellow metal has fallen by 12 pct since October, including a 3 pct drop after the U.S. central bank minutes suggested money printing might stop. Gold’s two-way bet - both safe-haven currency and speculative punt - looks to be ending. It has a long way to fall.
China’s central bank will find value in continuity 21 Feb 2013 PBOC governor Zhou Xiaochuan has presided over a decade of more-or-less stability. The cost has been financial repression and the build-up of sizeable risks. But the PBOC’s freedom is limited. If ideas and experience are what counts, Zhou remains the best person for the job.
BoE tempted by monetary radicalism 20 Feb 2013 One third of the UK central bank’s rate-setting committee wants to push monetary policy further. If the economy remains tepid and the next governor follows up on his dovish talk, the UK could test a no-holds-barred money-push. That would be exciting - but not in a good way.
Dirty money flight integral part of Putin’s Russia 20 Feb 2013 The head of the central bank says that the same “group of people” controlled half of the $50 billion of illegal money transferred out of Russia in 2012. The government can hardly feign surprise. Its claims notwithstanding, it is at the centre of the country’s web of corruption.
Hugo Dixon: The Bundesbank isn’t mad 18 Feb 2013 In a world where it is increasingly fashionable to call for central banks to print money, the German central bank is one of the last bastions of orthodoxy. Although its stance is extreme, it is a useful antidote to the theory that easy money is a cost-free cure to economic ills.
Central banks are globalisation’s new enemy 15 Feb 2013 Nearly every part of the economy is becoming more global. Trade is already so free that the proposed U.S.-EU Trade and Investment Partnership would produce only modest gains. So why are central banks stuck in a nationalist past? They’re in urgent need of globalised thinking.
King warns Carney that the UK is OK 13 Feb 2013 In presenting the latest inflation report, the outgoing governor of the Bank of England had two messages: be flexible on inflation and recovery is in sight. Markets only heard the first. But the economic comment is a warning to his successor Mark Carney not to overdo stimulus.
Fed’s extraordinary policy risks becoming ordinary 12 Feb 2013 Since World War Two, U.S. recessions have come on average every five years. That makes it likely that the United States will be stuck with ultra-low rates when the economy next turns down. This permanent monetary overdrive is bad for savers and the unbalanced global economy.
Interview questions for the new BOJ chief 12 Feb 2013 The Bank of Japan’s next governor will help decide the fate of Shinzo Abe’s anti-deflation campaign. Guts, diplomatic savvy and belief in the prime minister’s campaign will matter more than technical expertise. The following questions should help Abe choose the right person.
Money printing is actually a great idea 11 Feb 2013 Adair Turner, the UK FSA boss, broke a taboo by suggesting that governments should sometimes just print money to cover deficits. The regulator didn’t go far enough. Governments can create and destroy money at will. They shouldn’t be afraid to do so to melt away leverage.
ECB delivers long-overdue Irish relief 7 Feb 2013 The European Central Bank has given the nod to the restructuring of Ireland’s bank bailout, which will make the country’s debt more bearable. Euro zone leaders had resisted allowing their bailout fund to take on the burden. Luckily the ECB is stepping in when governments fail.