Archive for May 8th, 2012

German savers should applaud the growing TARGET balances…

May 8, 2012

Turning the TARGET2 debate on its head.

It was first suggested that TARGET2 balances will lead to losses for Bundesbank as it will make losses on the TARGET2 assets claims from Greece, Ireland etc. This was undone by further research saying first these claims are against ECB not Greece/Ireland Central Banks. Second, even if there are losses at ECB’s end the whole Eurozone will share the losses with share of Germany being around 27% (their share of ECB capital).

Now, this note from Sebastian Dullien & Mark Schieritz says German savers should be happy that TARGET2 balances are growing. First target2 is a response to what otherwise would have led to huge losses for Germans:



Does ECB’s monetary policy framework fit with Friedman ideology?

May 8, 2012

ECB is one of the few central banks which still believes in Friedman’s main idea- changes in money supply leads to inflation. ECB’s policies are  based on two pillars – economic and monetary. Most central banks have stopped looking at money supply a while back. Though they are being criticised for ignoring monetary flows  post-crisis.

Stephen Hall, P.A.V.B. Swamy, and George Tavlas explore ECB’s monetary policy based on principles cited by Friedman:


Battle of the beards: Paul Krugman vs. Ben Bernanke

May 8, 2012

A nice article by Robert J. Samuelson of WaPo. He reflects on the latest fight between Krugman and Bernanke.

First Krugman compared Bernanke to a Borg to which Bernanke responded in a press conference post FOMC in Apr-12.

Samuelson explains both sides of the debate. Krugman wants Fed to push for higher inflation but Bernanke does not agree. He nicely sums up:


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