Archive for the ‘Central Banks / Monetary Policy’ Category

Bernanke, Geithner, Paulson to lead new project explaining decisions of financial crisis…

November 17, 2017

One does not know how to react to such research projects. When the chief actors during the 2008 crisis get to figure what was behind their very decisions:

Ten years after the onset of the worst financial crisis in generations, the first-person “we were there” accounts by the those who led the rescue have been published, journalistic accounts have been written—and even turned into made-for-TV movies—and the Financial Crisis Inquiry Commission has disbanded after publishing its report on the causes of the crisis.

But in one important respect the record is incomplete: There is no coherent and detailed explanation of the dozens of design decisions the first responders made as they crafted the many rescue and stabilization programs. Why, for instance, did the Federal Reserve conduct auctions for its Term Auction Facility on Mondays, but provide winning banks the cash on Thursdays instead of immediately? (So no one would conclude that a bank that borrowed this way was so desperate that it needed the cash to open the next morning.) More generally, what options were rejected and why? In hindsight, what worked as anticipated and what did not? Besides completing the historical record, answers to such questions may clear up some lingering controversies and may prove useful the next time the U.S. or any other country confronts a severe financial crisis.

To fill that gap, the Hutchins Center on Fiscal and Monetary Policy at Brookings has teamed up with the Yale Program on Financial Stability to commission papers from those who crafted the rescues in the Bush and Obama administrations and the Federal Reserve.

The project will be led by former Treasury secretaries Tim Geithner and Hank Paulson and former Fed Chair Ben Bernanke, and will culminate in the presenting of research at a Brookings conference close to the tenth anniversary of the crisis on September 11 and 12, 2018. The conference will end with reflections by Messrs. Bernanke, Geithner and Paulson. My colleague, J. Nellie Liang, Miriam K. Carliner Senior Fellow in Economic Studies at Brookings and former director of the Fed’s Division of Financial Stability, will serve as editor for the papers.

Scholars will be studying and writing about the causes and consequences of the global financial crisis and the Great Recession for decades to come.  We hope the unique nature of this project—the first-hand accounts by those who were in the trenches—will inform that work.

Looking forward to this…


A closer look at history of small denomination coins…

November 16, 2017

Nice post by Hillery York. It also has a picture of the Lydia coin, the first ever coin produced.


Great Depression research remains the holy grail..

November 15, 2017

Bernanke called Great Depression the holy grail of macroeconomics.  It is perhaps one of those few events despite being historical continues to inspire so much research after all these years. Books continue to be written and debated vigorously on the crisis .

Came across two recent posts in this regard:

  • David Glasner argues how Friedman was not the first to argue about France’s role in gold standard which eventually was one of the key reasons for the Depression to become global. Lots of history of monetary thought in the post.
  • In another post, Robert Murphy says Gold Standard was not responsible for Depression.

Phew…Keep breaking heads over it…

Why study and research numismatics?

November 14, 2017

Nice post by Hillery York, Jennifer Gloede, and Emily Pearce Seigerman:

Whenever we tell friends and family where we work, their first response is typically, “What is Numismatics?” Of course, they pronounce it anywhere from “numismatic” to “gnomimatic!” The National Numismatic Collection (NNC) is the Smithsonian’s collection of monetary and transactional objects. It houses approximately 1.6 million objects spanning thousands of years and a great variety of materials. One of the best parts of our jobs is getting to share the collection with the world! Numismatics is a far-reaching field, and we’ve found connections to military history, facial hair, woman suffrage, and even Game of Thrones! We often share things about our favorite objects, but here are a few large, notable collections that you may not know are housed within the NNC. We’re making these available online, and researchers are welcome to contact us regarding their research in these areas.

Greco-Roman Collection

Ancient coins have long been collected because of their beauty, age, history, and sometimes rarity. Even dating back to the Renaissance, aristocrats and royals sought to add ancient coins to their collections. It makes sense then that the NNC would also have an extensive collection of these fascinating coins donated by various collectors over the years. Scholars recently dove into the collection to assess its strengths as compared to other notable museum collections. In doing so, they created a detailed listingof the holdings and discovered the collection contains approximately 26,900 Greek and Roman coins! These coins offer a great opportunity to study economics, art history, ancient coin production, classics, and more.

Numismatics is simply fascinating . It should be part of teaching monetary economics as it tells you so much about the monetary history and even politics around it…

We should move beyond just assembling these coins and put them in a museum. The idea should be to research and figure why certain coins were changed/modified, introduction of new coins and so on. Central banks should sponsor research on numismatics as there is much more to research than the usual “download data and run models”…

New Zealand should try build a central bank which has an open culture (applies to other central banks too..)

November 14, 2017

The earlier speculation of including employment in RBNZ’s inflation targeting mandate has gained steam as the new government has come to power.

Michael Reddell who has been educating us about NZ economy via his super blog says best way is to build a central bank which focuses on building an open culture environment. It is really nice when we hear things like culture etc in central banking and banking contexts where until not very long ago only models mattered. NY Fed has also been talking a lot about culture these days.

Reddell points how each central bank has a different culture:


What is money? A sociological perspective..

November 13, 2017

An interesting piece (written in Jun-2017) dealing with many aspects of money (HT: EconomicSociology blog).

The article is based from a book edited by Nina Bandelj, Frederick F. Wherry & Viviana A. Zelizer.

Zelizer writes this piece:

If all money is the same, why do we call some dollars “dirty” — or even “blood money” — and others “honest”? Why is the money we earn as a salary often spent differently from a lottery winning? Why did we invent gift certificates rather than offer straight cash? Why do organizations construct elaborate compensation systems marking differences between salaries, bonuses, and perks? Why is it that a wife’s money is often spent differently from her husband’s?

Some of these questions are getting unexpected answers. In the past few decades, novel approaches to money have challenged conventional wisdom: money is not one thing but many things. It turns out that how the money is earned, by whom, what it is spent on, when, and for whom often matters as much as — or more than — how much money is involved in the transaction. At stake is not just the quantity of money, but its quality; and that quality is variable. Consider, for instance, the powerful democratic symbolism of the small sums of money donated to Bernie Sanders’s presidential campaign in 2016. Surely, not all dollars are equal.

What explains money’s multiplicity? Behavioral economics tells us that people keep track of their finances by creating discrete mental compartments for their various moneys: rent money is thus set apart from entertainment money, investment money, or charity money. Unexpected funds occupy a different cognitive space from a salary or other forms of routine income, even when the sums involved are identical. People are likely to spend such windfalls less cautiously and more rapidly.

But these intriguing psychological partitions only explain part of money’s variability. Sociologists go further by showing how all of us dispense different “kinds” of money to mark distinctions among our social relations: we tip a waiter but not our spouse, we may give our child a weekly allowance but rarely our grandfather, we pay our employee with a salary not a gift certificate (unless it’s Christmas). We all care deeply about such monetary distinctions: the wrong kind of money might sometimes amuse us but will more often shock or offend. Why? Because mistakes violate our expectations of how social relations should work. Imagine my (and the administration’s) shock if one of my students offered me a bonus as an incentive to teach a better class.

Always interesting to go beyond economics view of money…

Central Bank of Mauritius completes 50 years: A glimpse of its monetary and banking history…

November 8, 2017

The Central Bank of Mauritius completed 50 years recently and inaugurated a money museum named after their first Governor.

Th current chief Mr Rameswurlall Basant Roi gives a terrific speech on the occasion covering both monetary history of the region and the future with crypto currencies. Though, one has read some interesting speeches from previous Governor Bheenick as well

He points how  Mauritius had its own era of free banking:


In Ancient Greece, coins with the owl of Athena traded throughout the known world and beyond!

November 8, 2017

Interesting set of Tweets on JP Koning’s handle:

In Ancient Greece, coins with the owl of Athena were so common that the proverb Γλαῦκ’ Ἀθήναζε (an owl to Athens) was like coal to Newcastle..

Hmm..Didn’t know about this… Central bankers who claim to be owls (and neither hawks nor doves) have history backing them..
More on these coins here…Read, read and read..

Bundesbank to study the tricky history of German central banking during Nazi period…

November 8, 2017

Interesting bit and one is already looking forward to read the findings of this monetary history project:


A 154-year-old USD 5 banknote: It is believed to be the oldest US banknote still in existence

November 7, 2017

Interesting bit of news for currency historians:

A 154-year-old banknote with local roots is expected to be auctioned off for thousands of dollars next week..The $5 bill, which was processed in Richmond on Nov. 2, 1863 by First National Bank of Richmond, is believed to be the oldest banknote still in existence that was minted for an Indiana bank. It bears the serial number 1.

The currency is being auctioned through Stacks Bowers, a Santa Ana, Calif.-based auctioneer group specializing in historical currencies and has already received an online bid of $9,000. That figure could nearly triple by the time it’s sold at auction, Manning Garrett, director of paper money currency for the group, said.

Garrett said he expects the bill to bring anywhere from $15,000 to $25,000 or higher at auction Nov. 9, which will be held in Baltimore.

“It’s pretty exciting,” he said. “We see new discoveries occasionally from the 1920s or 1930s, but finds like this — from the height of the Civil War — you just don’t see stuff like that very often.”

 Jim Harlan, executive director of the Wayne County Historical Museum, is familiar with these bills with the Richmond origination and knows some Richmond residents who are collectors who would likely have an interest.

“They were definitely in circulation,” he said. “There’s some people in town that do collect those large size notes.”

Exciting indeed!

Meanwhile, BOJ’s Kuroda laughs off face-watchers trying to predict policy changes

November 3, 2017

I had pointed to ongoing research where researchers are trying to estimate future policy using changes in facial expressions of central bankers.  The researchers had studied BoJ’s Kuroda and figured some things.

Now Kuroda on hearing this, laughed off the idea (HT: MR blog):

On Tuesday, Kuroda suggested that the researchers could be easily outsmarted.

“I apologize to the people who are doing this research, but I really have no idea whether or not this is meaningful,” Kuroda said with a laugh at a press conference.

“If you try to decide something based on a specific indicator, people will behave in such a way that (your prediction) doesn’t happen. Then it simply becomes a game of cat and mouse.”


It is always a cat and mouse game between media/researchers and central bankers…

Bank recapitalisation bond plan: An attempt to hide failure of banking regulator?

November 2, 2017

Ila Patnaik writes a scathing piece on the recent Banking recapitalisation bond plan. She says the problem is not limited to public banks alone but even private ones which have hidden NPAs all the while. What was regulator doing all this while?


The evolution of the promises on India’s banknotes (1770 onwards)

October 31, 2017

JP Koning has another fascinating post on how the promises on the banknotes have changed over the years.

Taking a cue, I looked at India side of the story as well (Source: The Paper and the Promise written by Bazil Sheikh and Sandya Srinivasan). This is how it goes:


History of Burma’s 3 demonetisations: 1964, 1985 and 1987…

October 30, 2017

Superb piece by Ananth Karthikeyan in Mint.

He analyses the three demon episodes in Burma:

The demonetization of 1964

The economy, unsurprisingly, plumbed and black markets grew exponentially. The Junta, however, did not pause to reflect. They could not slow down their drive to nationalization everything without losing face and revealing their administrative naiveté. Since they jealously guarded power, they could not delegate responsibilities, install a proper financial system or curtail policies that drove galloping inflation.

Something had to give. The dictator’s mind, moulded by years in the military, now seized upon a blitz-like move. In what was meant to be a masterstroke, large denomination notes, with which the “evil capitalists and deviants” obviously hoarded their money, would be swept away.

The reasoning was as follows: the Indians and the Chinese would be the first casualties and inflation would be halted. Therefore, the people would welcome the move. All deviants who had the gall to live outside the control of the state would be broken. The coterie around Ne Win concurred.

The Demonetisation Act of 1964 declared that all Burmese kyat notes of denominations of 50 and 100 ceased to be legal tender overnight. These notes were to be surrendered to receiving centres established all over Burma.

Reimbursement would be provided if notes were surrendered within a week. For small amounts, spot reimbursement was promised. For amounts between 500 and 4,200 kyats, “timely” reimbursement was guaranteed. Any amount over K4,200 would warrant further scrutiny and the application of an escalating tax.

The Junta’s narrative was wrapped in conflicting themes of divisiveness and social justice. The official declaration of the central bank proclaimed that this revolutionary move was designed to remove social evils: “The purchasing power of the vast sums of hidden money which could be used to embarrass the Government and the economy, by unsocial acts of hoarding and speculation of essential commodities (by foreigners and evil capitalists).”

Drawing upon popular perceptions and memories of Indian moneylenders and financiers, the Junta claimed that foreign capitalists (meaning ethnic minorities who were never given full citizenship) had historically accumulated money that belonged to the real people, thus hindering the Burmese Way to Socialism.

Ethnic Indians and Chinese, already reeling under nationalization, suddenly found themselves destitute. Most of them decided to leave Burma for good. An overwhelming majority of Burmese Indians were small financiers and businessmen—a far cry from the rich and powerful community of pre-war Burma—and now they were even more wretched.

It would take the concerted effort of a number of Indian ministries to bring them to India. The Junta, on its part, did everything to hasten the emigration.

However, the demonetization did not impact just the “evil capitalists” targeted by the government. In a predominantly cash economy, demonetization ruined many ordinary people and small businesses.

78% of notes were returned but it just shook the system:

In the end, the 1964 Burmese demonetization was a dismal failure. The state’s endless hunger for funds resulted in a huge quantum of new denomination notes soon matching the demonetized money. Inflation continued unabated.

The greatest consequence was the loss of confidence in the kyat. People returned to holding wealth in the form of precious metals and stones. Coins were hoarded and there was soon an endemic shortage of small change.

The atmosphere was rife with rumours of further demonetizations.

None of these lessons were learnt and the country saw 2 more demons in 1985 and 1987. In 1985, the purpose was also to widen the tax net which obviously failed as well..

Lessons of monetary history should be learnt well


Ireland Central Bank boss Philip Lane to channel his inner Elvis for in-house opera…

October 30, 2017

Central bankers also do things which could be of wider interest!

Ireland Central Bank top brass is staging an Opera to collect funds for its charity work:

Oh yeah, Central Banking goes on, Long after the Troika’s been and gone, bank on.” The IMF might have something to say about this sort of triumphalism.

We long suspected this might be what the regulator is carolling in the midst of the much vaunted recovery – and it turns out we were right.

Releasing money on the sly to fuel another Celtic Tiger recovery to an Ireland awash with post-Brexit funds and talk of the housing supply banned on the grounds of being ‘fake news’, – this is the rather longingly dystopian view of the economy which has come out of the mouths of babes – or rather the Central Bank itself – in a startling fact or fiction scenario. Oh what larks.

We should be somewhat reassured that it is merely an ‘opera’ written by one of its own top brass – due to be staged shortly as a private event for staff only in order to raise funds for the Central Bank’s nominated charities.

The opera, rather dryly named ‘A Guided Tour of the Central Bank of Ireland’ is a bit of a skit against the regulator itself and opens by admitting that prior to the recent financial crisis, “very few people knew or cared about the Central Bank”.

Governor Philip Lane will launch into a catchy tune, set to the air of ‘Blue Suede Shoes’ by Elvis Presley in which he vents, saying: “We protect consumers, regulate the banks, Do it all for very little thanks.” Another staffer launches into an ode to the UK funds industry, urging them to come to Ireland in in the wake of the Brexit vote.

More alarmingly, another one set to Adele’s ‘Hello’ goes: “We worry because what banks done, You will never own your own home, Hello from the inside, At least we can say that we tried, To tell you the economy’s falling apart, But it don’t matter as clearly you just continue to borrow some more.”

There’s a little dig about the regulator pulling forecasts out of the thin air, a thinly disguised plea from the staff for their own pay to be restored, with the verse: “You talk about your EVP, Blame Fempi and austerity, But you’re just playing the game, Governor.”


Here’s what Sweden’s banknotes looked like 100 years ago

October 26, 2017

Nice post full of pictures of old Swedish banknotes. Those were times when banks could design their own notes along with that of Riskbank:

The ten-kronor note hasn’t existed in Sweden for more than 20 years, but at one point there were dozens of different designs for the note, with the country’s different banks each designing their own.

Sweden’s Royal Coin Cabinet museum has shared images of late 19th-century ten-kronor notes as part of an initiative to raise awareness of its collection.

At the time, there were 31 private banks across the country, each of which had the power to issue its own banknotes, so in 1901, for example, there were 28 examples of the ten-kronor note. Banks would display images of all the valid notes, as seen in the picture above, so staff could carry out their jobs and spot forgeries.

“This was a special period in Sweden’s economic history, where we had a standard currency but different banknotes,” Åsa Hallemar from the museum told The Local.

“You can see that the motifs on the banknotes were there to promote the regions, for example people and buildings which were important to the city in some way.”


Central banks: Evolution and innovation in historical perspective

October 25, 2017

Michael Bordo and Pierre Siklos have a shorter piece based on their longer research paper

I was particularly interested in the results reported of Canada. There is this research which suggests how Canada had a stable financial system even before it had a central bank unlike other countries like US. Canada is also seen as a good example of free banking by its proponents.
What is interesting is how Canada without a central bank does well in things like inflation etc.:


Will Reserve Bank of New Zealand move from inflation targeting to having a dual objective?

October 25, 2017

I had already blogged about it in April 2017.  The talks were already on that if Labour Party comes to power in upcoming elections then the central bank might be given wider powers.

Now post elections as coalition with Labour Party has come to power, the expectations of a renewed mandate for the central bank have come to fruition.


Political economy of central bank appointments: Case of Italy..

October 24, 2017

One just pointed the case of Sweden where there was friction between ruling and opposition parties over appointment of central bank chief.

We are seeing similar frictions in Italy too. Moreover when it comes to such matters, how can Italy be behind? Just that this one has its own Italian drama as well.

The ruling and political party are in a friction over extension of tenure the current central bank governor:


Suggestion from Catholic Social Services Australia: Central Bank Boards have a ‘representative of the poor’…

October 23, 2017

Couple of months ago, this blog had pointed how Proctor of South Africa wanted their central bank to have wider goals. Later we learnt that this plea was dismissed.

Now Catholic Social Services Australia gets into action and have made a report:  An Economy That Works for All. One of their suggestion is:

create a new position on the RBA Board:  Appoint a preeminent Australian who has knowledge of and experience of the consequences of monetary policy on the poor and marginalised to reinforce the inter-connectedness of economic and social policy and acknowledge the role the RBA can play in using monetary policy to improve the lives of the poorest and most marginalised in our society.

Usman Chohan of Univ of New South Wales responds  (who also points to all these developments) saying central banks can no more ignore inequality. Central bank policies have hit the poor disproportionately. But whether we should have a representative of the poor?


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