Archive for the ‘Discussion’ Category

The Shifting Wealth of Nations: How Argentina fares worst amidst all countries…

June 27, 2019

Prof Tim Taylor on his blog points to this interesting research by Micheal Cembalest of JP Morgan.

Cembalist looks at socialism across world and find Nordic nations are hardly socialistic.



Indian public refusing certain coins as legal tender: Demonetisation fears keep lurking..

June 27, 2019

I recently learnt that people are not accepting certain coins of Rs 10 denominations.

RBI released yet another circular saying all coins are legal tender (see previous appeals as well):


Central banks vs populists tweet storm: ignore or fight

June 27, 2019

National Bank of Ukraine and Bank of Poland organised  their Annual Research Conference (HT:

There was a panel discussion on  Central banks vs populists: ignore or fight. The panelists were:

Olga Stankova, International Monetary Fund
Emma Murphy, Bank of England
Yuriy Gorodnichenko, University of California, Berkeley
Dmytro Sologub, National Bank of Ukraine
Miroslav Singer, Generali CEE Holding
The video of the panel is on youtube.
Miroslav Singer, former Governor of Czech Central Bank says he would rather fight and ignore 🙂 Prof Yuriy Gorodnichenko of University of California Berkeley says fight between the two has been there for a long time.
The last question asked to panelists was how to fight a tweetstorm by say Trump? All said you cannot fight the storm as President has many more followers. One can atmost clarify facts and not take it personally.
Lots of other interesting questions.

Financial Gerontology: An emerging new sub-field in finance..

June 27, 2019

Haruhiko Kuroda, Governor, Bank of Japan in this speech talks about Financial inclusion in aging society:

As we get older, we all become physically weaker. Declining mobility means we can no longer take it for granted that we can easily visit bank branches. Deteriorating eyesight and hearing ability may impair our capacity to fill out a form or understand a face-to-face explanation. Declining cognitive ability may create difficulty in making financial decisions. Moreover, there is the risk that senior citizens will become victims of financial crime. In 2018, among all recorded cases of so-called special fraud in Japan — such as telephone-based identity deception — 78 percent of the victims were aged 65 and over.

Financial inclusion is therefore an extremely important social agenda in an aging society, as it ensures that senior citizens — who may have difficulty in visiting banks or making financial transactions due to age-related decline — can continue to use financial services with confidence and benefit as much as possible from these services.

In the field of what is known as “financial gerontology,” there has been discussion about ways to make the adult guardianship system more effective in order to protect the rights of senior citizens with cognitive decline. The use of innovative digital technologies has also been considered. For example, using biometric technology for identity verification and mobile payments will enable senior citizens to have secured access to financial services without actually visiting bank premises. Moreover, the use of speech recognition technology will enable financial transactions to be made without the need for physical writing or keyboard skills. Advances in technology may create increasingly comprehensive financial services that are better tailored to the needs of the individual senior citizen.

These new financial services for senior citizens can also be a great business opportunity for financial institutions. On the other hand, as technology advances, the risk of technology abuse will increase, and vigilance is therefore essential to maintain security.


Though, in India we hear the opposite. How these technologies have made it difficult for aged people to access their own deposited money.

As societies age across the world, financial gerontology is going to be an important are of study.


Twenty Years of the ECB’s monetary policy: Trial by Fire

June 26, 2019

Mario Draghi of ECB summarises the twenty years of monetary policy of ECB:

The euro was introduced twenty years ago in order to insulate the Single Market from exchange-rate crises and competitive devaluations that would threaten the sustainability of open markets. It was also a political project that, relying on the success of the Single Market, would lead to the greater integration of its Member States.

On both counts, the vision of our forefathers has scored relatively well. Imagine where the Single Market would be today, after the global financial crisis and rising protectionism, had all countries in Europe been free to adjust their exchange rates. Instead, our economies integrated, converged and coped with the most severe challenge since the Great Depression.

That leads me to four observations.

First, the integration of our economies and with it the convergence of our Member States has also greatly increased. Misalignments of real effective exchange rates between euro area countries are about a half those between advanced economies with flexible exchange-rates or countries linked by pegged exchange rates and they have fallen by around 20% in the second decade of EMU relative to the first.[20]

Second, the dispersion of growth rates across euro area countries, having fallen considerably since 1999, is since 2014 comparable to the dispersion across US states.

Third, this has been driven in large part by the deepening of European value chains, with EMU countries now significantly more integrated with each other than the United States or China are with the rest of the world.[21] Most EMU countries export more with each other than with the US, China or Russia. Fourth, employment in the euro area has reached record highs and in all euro area countries but one stands above its 1999 level.

But the remaining institutional weaknesses of our monetary union cannot be ignored at the cost of seriously damaging what has been achieved. Logic would suggest that the more integrated our economies become, the faster should be the completion of banking union and capital markets union, and the faster the transition from a rules-based system for fiscal policies to an institution-based fiscal capacity.

The journey towards greater integration that our citizens and firms started twenty years ago has been long, far from finished, and with broad but uneven success. But overall, it has strengthened the conviction of our peoples that it is only through more Europe that the implications of this integration can be managed. For some, that trust may lie in a genuine faith in our common destiny, for others it comes from the appreciation of the greater prosperity so far achieved, for yet others that trust may be forced by the increased and unavoidable closeness of our countries. Be that as it may, that trust it is now the bedrock upon which our leaders can and will build the next steps of our EMU.

Whatever the criticisms, EU polity continues to move ahead with the integration. People had questioned Euro right at inception and believed it would break down soon, but that has not happened.

Bosnia Presidency sacks two Board Members of the central bank..

June 26, 2019

Central bankers are under immense pressure across the world. One is seeing them being fired or resigning under pressure/humiliation. From Governors to Deputy Governors and now Central Bank Board members.

Bosnia has fired two Board members:

Bosnia’s tripartite presidency has sacked two Serb members of the central bank’s managing board, officials confirmed on Thursday, but the lack of an explanation of the decision raised concerns the move was politically motivated.

Bosnia’s inter-ethnic presidency appoints the members of the bank’s managing board and may dismiss them if they violate the law on the central bank, which manages monetary stability under the currency board arrangement pegging the Bosnian marka to the euro under a fixed rate.

The presidency session was convened on Wednesday but an official statement did not mention the decision.

A spokesman for the presidency chairman, Serb Milorad Dodik, confirmed the decision was made at Dodik’s request but could not say what the reason behind the move was. The decision was made by two votes to one after Zeljko Komsic, the Croat presidency member, agreed, but there was no consensus on new appointments, Komsic’s cabinet said. It added that Dodik had said the two board members were unfit to hold the roles.

The Board comprises of 5 members and is chaired by the Governor.

Further, the appointment of Board members is distributed across powers:

The central bank declined to comment, saying they had not received any official note on the sackings.

The managing board consists of five members, three of whom come from Bosnia’s autonomous Federation dominated by Bosniaks and Croats and two from the Serb-dominated Serb Republic.

The two Serb members had been nominated by parties which are in opposition to the SNSD party headed by Dodik.

A Western diplomat who did not want to be named said he feared the move may undermine the independence of the central bank and advance nationalist agendas.

Neither of the two board members were reachable for comment.

Dodik has long tried to influence the central bank policy, insisting that the foreign currency reserves the bank keeps at major foreign banks should be diverted to support local firms. Under the currency board arrangement, the central bank may only invest in securities of highly-rated euro zone countries that guarantee adequate capitalisation and liquidity.

The motive behind firing is the same though…

PIB Archives from 1947-2001

June 25, 2019

This is just a fascinating initiative from the Government.

It has put up archives of all Press releases across different Ministries from 1947-2001. IN the Search box on the right. one can search across keywords. One can also search words/text on the archival material as well.



From Versailles to the Euro

June 21, 2019

Robert Skiledesky adds to centennial of Versailles treaty (Read Barry Eichengreen, Harold James, Amartya Sen).

Skiledesky says Germany was the debtor then and is the creditor now and inflicting similar pain on Greece:


India’s GDP growth controversy points to deeper problems over economic advisory in the country..

June 20, 2019

One expected lots of analysis post Subramaniam’s paper but the choice of words is appalling. After accusing his research of intellectual treason, another economist wrote the following:

The Indian statistical process is robust, independent and continually improving. More can and should be done to strengthen it and its advisory committees but bringing in outside experts who do not understand the economy can be counter-productive.


What is even more worrisome is how the two authors are part of economic advisory. One is part of PM’s Economic Advisory Council and another is one of the several co-authors of PM EAC’ report questioning the analysis. And for all you know, PM’s EAC has people who would be considered as foreign experts. Infact, that is one of the most important criteria for getting economic policy positions in India!

This should not be acceptable. I really do not know why the established media houses agreed to publish such words. Moreover, one expects better judgement for those holding offices of power. Criticise something threadbare but one has to maintain some decorum.

Though, it points to even a larger point. One is increasingly seeing how economic advice is getting politicised. Anyone who becomes an economic adviser to the government is seen as being accountable to the government at power and not to the country at large. The job of the adviser is not seen as providing any economic advice but stand-up for the government at all costs.

Infact, it is fine if governments think that way. What becomes a bigger problem is when advisers also think and signal in the same direction.

Let us imagine that Arvind Subramaniam actually said the opposite using similar analysis: India’s GDP growth rate is underestimated by 2.5%. One is wondering whether EAC and its members would write similar articles criticising the approach? Most likely not and they would have celebrated the paper. But then that is the role of the adviser. To keep guiding on the right path. If AS’s paper follows poor methodology, it should be criticised either way.

Somehow the contract between Principal and Agent has weakened and does not inspire any confidence. This does not augur well for Indian economy at all.

The experts we need..

June 20, 2019

Andres Velasco has a timely piece on the topic.

Worldwide experts are disliked and trolled. But does that mean we don’t need experts. Of course not. Just that we need more grounded and humbled ones:

In an ideal world, experts would present a menu of policy choices from which citizens wisely choose. But in the real world, citizens have neither the time nor the inclination to sift through complex and tedious policy alternatives. Nor, sadly, do most politicians. Policy wonks are seldom asked for a menu of options; more often, they are asked a simple question: what should we do? And in answering that question, wonks inevitably bring their own values and preferences to bear.

So, as with so many political issues nowadays, it comes down to a matter of identity: can voters identify with the expert or the politician whom the expert advises? Can voters sense that they belong to the same tribe and uphold the same values?

Typically, the answer is no. And there lies the root of the problem. Policy gurus and politicians probably spend too much time with others like them – top civil servants, high-flying journalists, successful businesspeople – and too little time with ordinary voters. This undoubtedly shapes their worldview. As a Spanish-language saying goes, “Dime con quién andas y te dire quién eres”: “Tell me who your friends are and I’ll tell you who you are.”

So how can experts regain citizens’ trust? The answer is paradoxical: by becoming intellectually more modest, less beholden to the rarified ways of the ivory tower and the lecture hall, and likelier to listen to people who do not have a PhD. If they could become “humble, competent people on a level with dentists,” as John Maynard Keynes once suggested, then there is at least a chance that voters will identify with the nerdy pointy-heads and find them trustworthy.

The task is urgent, because the world needs credible experts. After all, if a tooth aches, we turn not to a pleasant and well-meaning friend, but to the frightening syringes and drills of the most competent dentist we can find.


The future of cash in New Zealand

June 20, 2019

Reserve Bak of NZ issued a report on future of cash in the country:

The future of cash1 in New Zealand is uncertain. The Reserve Bank of New Zealand (Reserve Bank) is in the middle of a multi-year programme to establish The Future of Cash — Te Moni Anamata. This programme has identified that, despite an increasing trend in the overall cash in circulation (CIC), New Zealand is becoming a society that uses little cash.

New Zealanders are using cash less and less for transactions. As the transactional demand for cash falls, the per transaction cost of providing cash infrastructure increases. Commercial operators have natural incentives to reduce their costs and reduction in cash demand and use could lead them to reduce their provision of cash infrastructure, or to stop accepting and issuing cash. Such decisions — driven by commercial considerations — would in turn further increase the per-transaction costs of providing cash and lead to further reductions in the cash network.

The benefits of having cash become greater and greater as more and more people use it. This so-called ‘network effect’ of cash, also declines as fewer people use it. For example, if fewer consumers, businesses, and banks dealt with cash, the ability for people to use cash for transactions in stores and between individuals would decline. If this occurred, some of the unique roles of cash could be lost. The legal tender status of cash does not oblige anyone to accept cash as a means of payment except for debt.

A contraction in the cash network without regard to the wider benefits of cash in society might significantly disadvantage people who rely on the unique role that cash plays in their lives. This would be considered a market failure2 to the extent that commercial operators did not fully incorporate the wider network benefits of cash. As a result, government action could be warranted following the completion of this review.

The Reserve Bank is the sole issuer of cash in New Zealand and is required to issue currency that meets the needs of the public.3 There is no agency responsible for over-seeing the usability of cash by the public or stability of the cash system in New Zealand. Therefore, the Reserve Bank is taking a leadership position to assess the future of cash.

This issues paper outlines our4 preliminary analysis of the role of cash in society and the trends in cash use and supply. It sets out the key issues to consider – both positive and negative – if less cash were being used in New Zealand accepted that:

    1. People who are financially or digitally excluded could be severely negatively affected. These include:
      1. People who are not banked or have limitations to accessing the banking system, such as people without identification and proof of address, people with convictions, people with disabilities, illegal immigrants and children.
      2. People who face barriers to digital inclusion, such as people with disabilities, senior citizens, people with low socio-economic status, people that live in rural communities with low internet service, migrants and refugees with English as a second language, Pasifika, and Māori.
    2. Tourists, people in some Pacific islands, and people who use cash for cultural customs might be negatively affected if they cannot use cash substitutes.
    3. All members of society would lose the freedom and autonomy that cash provides and the ability to use cash as a back-up form of payment, and might be more exposed to national and personal cyber threats.
    4. There would be limited or balanced effects for people’s ability to budget, New Zealand’s financial stability, and government revenue.
    5. Cash infrastructure is costly. Moving to a society with less cash could increase efficiency and reduce the overall transaction costs of payments.

The issues arising from a society with less cash have a broad reach. This issues paper invites your feedback on whether we have correctly identified the most important issues and whether there any other significant issues that should be taken into account. It also seeks initial views on the roles of government and Reserve Bank are regarding these main issues.

The Reserve Bank will publish an analysis of the feedback received, as well as further research. A formal policy consultation may follow depending upon what emerges from feedback on this paper and further research and analysis.


Book Review: The Bank of England and the Government Debt (1928-1972) (Another way of looking at MMT?)

June 19, 2019

A new book by William Allen who worked for Bank of England from 1972 to 2004 on monetary policy formulation and financial market operations.

John Wood reviews the book:

 Central banks do more than conduct monetary policies aimed at price level and employment objectives. They also — and this was the Bank of England’s (the Bank’s) original and primary task for most of its history — raise money (issue/sell securities) for governments, and in the course of debt management support orderly and otherwise attractive markets for those securities, including gilt-edged bonds in the UK, or gilts, so called because their paper certificates had gilded edges. The purpose of this book “is to describe the [Bank’s] operations in the gilt-edged market” from 1928 to 1972, “and to suggest possible reasons why they were at times conducted in a way which most economists found quaint and incomprehensible” (p. xiii). The author worked for the Bank from 1972 to 2004 on monetary policy formulation and financial market operations, and his book endeavors with a good deal of success to connect these activities.

The market for gilts has largely been conducted by the brokers and jobbers (dealers/market-makers) of the London Stock Exchange since the eighteenth century. (UK bonds are also known as Treasury stock, and historically were among the main securities traded on the Stock Exchange.) Not being an Exchange member, the Bank dealt through a broker, the Government Broker, the senior partner of Mullens and Co. A primary goal, and the one emphasized in this book, was “to maintain the liquidity of the gilt market,” and in this connection act as market-maker of last resort. This role of central banks “has been discussed extensively in the context of the crisis of 2008-09,” but the present study shows that the Bank had long acted in this manner, and even, at times, as market-maker of first resort (pp. 2-3). “The term ‘market liquidity’ refers to the ease with which large amounts of an asset can be bought or sold; ease embraces both the amount of time it takes to complete the transaction, and how close the transaction price is to the price ruling in the market just before the transaction was undertaken” (p. 6).

The Bank’s financial activities depended on the monetary policies chosen by the government. In particular, its interventions were dictated by the government’s frequent preferences for interest rates that differed from market equilibria. The Bank acted pretty much as a price taker during the 1930s, when yields rose with recovery from the Great Depression, but was a substantial buyer during World War II as it supported interest-rate ceilings on government debt. From after the war to near the end of our period, the Bank (along with other central banks) was torn between the often contradictory goals of a fixed exchange rate and full employment, forcing devaluations of the pound from $4.20 to $2.80 during Labour’s “cheap money” policy in 1949 and to $2.40 in 1967, which was a delayed reaction to the Tories’ growth policies of the late 1950s and early 1960s. Among the unfortunate side effects of the misalignment of policies were foreign exchange controls and the suppression of private demands (including investment) by means of controls on consumer credit and bank lending.


This is another way of looking at MMT.

MMTers say the central bank works a lot with government than we are made to think.  Much of central bank policies are done while actively managing the government debt. The central banks not just buy the debt but also manage the yields. Pre-central bank era they did so based on government orders and post-independence era, do it by stealth. Infact legally too, central banks change their balance sheets by changing the composition of government bonds.

Thus, even if you disagree whatever MMTers have to offer you cannot deny this is how central banks actually work!

The fallout of overestimated Indian GDP: Scrap RBI’s monetary policy panel or give it a dual mandate?

June 19, 2019

All  kinds of things being written after Arvind Subaramaniam’s research paper was released which said India GDP growth rate is overstated by 2.5%.

From being labelled a scoot and shoot economist to being accused of intellectual treason! It is such a pity when you are given all the names for merely writing a paper! I mean one can disagree with the ideas but accusing someone of treason! Really? How bad is it going to get? Cannot believe that a leading financial daily actually agreed to publish such acerbic stuff. How low is it going to get?

Anyways, another piece questions the role of RBI’s MPC:


The Overuse of Mathematics in Economics: View from an economics student

June 19, 2019

Luka Nikolic, Master’s student (Business and Economics) at the University of Ljubljana writes:

If you enrolled at university today, you would find economics modules filled with mathematics and statistics to explain economic phenomena. There would also be next to no philosophy, law, or history, all of which are much more important to understanding the way our world works and how it impacts the economy.

The reason is that since the end of the 19th century, there has been a push toward turning economics into a science—like physics or chemistry. Much of this has been done by quantifying phenomena and explaining it through graphs. It has been precisely since this shift that there has been such a poor track record of public policy, from fiscal to monetary.

What many contemporary economists fail to realize is that economics is as much of a philosophical pursuit as a mathematical one, if not more so.

What follows is a short history of economics and why Maths despite being important only answers so much.


Italy’s Mafia Uses the Old Lira as Its Own Parallel Currency

June 19, 2019

As Italy plans fiscal money to subvent ECB and Euro, there is another interesting story from the country.

Italian Mafia still uses Old Lira notes!

Italy’s proposed mini T-Bills may be pie in the sky for now, but it appears the country already has another currency floating around — the old lira.

A senior police officer revealed this week that domestic criminal organizations are still using the pre-euro currency for illicit transactions. It’s not clear how the former notes are ultimately exchanged for euros, if at all, though he said officers are still uncovering them. The lira ceased to be legal tender at the end of February 2002.

“We still discover big amounts of liras,” Giuseppe Arbore, a deputy in the Guardia di Finanza, which investigates financial crimes, said at a parliamentary hearing on Thursday. “Italian liras still constitute parts of illicit transactions.’’

Arbore’s remarks prompted amazement among lawmakers of the Senate Finance Committee, where he was testifying on a government bill aimed at simplifying the tax system. When pressed to provide examples, he said he couldn’t elaborate, citing ongoing investigations.

“When a banknote is accepted by an organization internally, even if it is outside the law as a legal value, it can settle transactions,’’ he said. “We are obviously talking about illicit organizations.’’


Under current legislation, it’s not possible to convert lira, and the Bank of Italy years ago transferred the equivalent value of the currency still in circulation to the state, around 1.2 billion euros, according to the central bank’s website.

It’s not the first time that the mob and the former currency have been linked. In 2012, the central bank’s Financial Information Unit report said it worked with the Bureau of Anti-Mafia Investigation on “suspicious transaction reports’’ relating to lira-euro conversions.

Italy and its Mafia!

Though the bold bit is how anything becomes a currency and if backed by State becomes legal tender.

History of Australian equity market: 1917-79

June 19, 2019

Thomas Matthews of RBA in this paper:

This paper presents stylised facts about the historical Australian equity market, drawn from a new hand-collected unit record dataset on listed companies from 1917 to 1979. Among other things, I show that: i) dividends for the early 20th century were lower than previously believed; ii) the realised returns on equities has averaged about 4 percentage points above that on government bonds since 1917, somewhat lower than previous estimates; iii) the share of profits paid out as dividends increased substantially after the introduction of franking credits in the 1980s; iv) the current industry composition of the stock exchange is atypical relative to history, despite it being dominated by essentially the same companies for the past century; and v) price-to-earnings ratios are currently almost exactly at their very long-run average, in contrast with the experience of some other countries.

Good stuff!

Economic Lessons from heavy crowding at Mt. Everest

June 18, 2019

Jim O’Neill in this piece applies ecomomic lens to the heavy overcrowding seen at Mt Everest this year:

Beyond specific conditions such as the narrowness of the trail, Everest’s overcrowding problem is not so different from many other economic and social challenges that policymakers confront, namely an imbalance between supply and demand, and possibly poor regulation. One example, of special concern to me, is the , which is failing because the development of new drugs is not keeping pace with demand. But more closely related to Everest is the broader challenge of managing tourist hotspots. Around the world, more and more people have joined the middle class, and they (understandably) want to experience the best that the planet has to offer.

When it comes to Everest, part of the problem is a fixed supply. There are only so many paths up the mountain (though some daring alpinists, no doubt, prefer to blaze their own), but the number of tour groups has increased. Given this, it stands to reason that the price should be allowed to rise until the balance between supply and demand is restored.

Of course, Nepalese policymakers, eager for tourism revenue, would balk at this suggestion; and they would probably argue that the average visitor should not be turned away from such a massive natural attraction. But, in that case, they must introduce and enforce stricter safety and regulatory standards for the companies offering tours up the mountain (which will also put upward pressure on prices).

The same fixed-supply problem applies to all tourist hotspots. As I have noted previously, Switzerland would have to produce more beautiful mountains to have any hope of satisfying the burgeoning demand from Chinese tourists visiting the Alps. The same can be said of Petra, Jordan, or any other wonderful destination. In all of these cases, the rational economic solution is to allow the price to rise, or to introduce more stringent regulatory controls.

Facebook’s cryptocurrency Libra

June 18, 2019

FB’s crytpcurrency has been much talked about.

The whitepaper has just been released. This is the technical version, which requires know how of computing.


Fiscal Money Can Make or Break the Euro

June 18, 2019

As European central bank controls all monetary operations, the constrained European governments are trying to figure ways to create money on their own.

Italian government is planning to issue short-term treasury bills or mini-BOTs which has led concerns over creation of parallel currency and give government avenues to spend.

Yanis Varoufakis, former FInance Minister of Greece in this piece explains how in his tenure he had proposed a variant of this proposal. But it was aimed at saving the Euro:

My idea was to establish a tax-backed digital payment system to create fiscal space in eurozone countries that needed it, like Greece and Italy. The Italian plan, by contrast, would use a parallel payment system to break up the eurozone.

Under my proposal, each tax file number, belonging to individuals or firms, would be automatically provided with a Treasury Account (TA) and a PIN number with which to transfer funds from one TA to another, or back to the state.

One way TAs would be credited was by paying arrears into them. Taxpayers owed money by the state could opt for part or all of those arrears to be paid into their TA immediately, instead of waiting for months to be paid normally. That way, multiple arrears could be eliminated at once, thus liberating liquidity across the economy.

For example, suppose Company A is owed €1 million ($1.1 million) by the state, while owing €30,000 to an employee and another €500,000 to Company B. Suppose also that the employee and Company B owe, respectively, €10,000 and €200,000 in taxes to the state. If the €1 million is credited by the state to Company A’s TA, and Company A pays the employee and Company B via the system, the latter will be able to settle their tax arrears. At least €740,000 in arrears will have been eliminated in one fell swoop.

Individuals or firms could also acquire TA credits by purchasing them directly, via web-banking, from the state. The state would make it worth their while by offering buyers significant tax discounts (a €1 credit purchased today could extinguish taxes of, say, €1.10 a year from now). In essence, a new dis-intermediated (middlemen-free) public debt market would emerge, allowing the state to borrow small, medium, and large sums from the private sector in exchange for tax discounts.


Indeed, if my parallel, euro-denominated system had been operational in June 2015, when the European Central Bank closed down Greece’s banks to blackmail its people and government into accepting the third bailout loan, two outcomes would have been possible. First, transactions would have shifted massively from the banking system to our TA-based public payment system, thus reducing substantially the ECB’s leverage. Second, it would be common knowledge that, at the push of a button, the government could convert the new euro-denominated payment system into a new currency.

In our case, the idea was to keep Greece viably within the eurozone by using the additional bargaining power afforded by the parallel payment system to negotiate the deep debt restructuring needed to revive economic growth and ensure long-term fiscal sustainability. As long as our creditors saw that our redenomination costs were lowered, while our demands for debt restructuring were sensible, they would think twice before threatening us with Grexit. Joint action by the ECB and my ministry would allow the parallel system to be portrayed as a new pillar of the euro, thus quashing any financial panic. By ending the popular association of the euro with permanent stagnation, the parallel system would be the single currency’s friend.

What about Italy?

This brings us to Italy. There are two technical differences between the system I designed and Italy’s planned mini-Treasury bills (or mini-BOTs). First, mini-BOTs will be printed on paper, something I opposed, to avoid a grey market. Our total supply of digital credits would have been managed by a distributed ledger, to ensure full transparency and prevent the inflationary overproduction of credits. Second, the mini-BOTs will be interest-free, perpetual bonds, without future tax discounts.

But the real difference between the Italian scheme and mine remains political. The parallel payment system I proposed was designed to use the reality of lower eurozone exit costs to create new fiscal space and help civilize the monetary union in the process. Italy’s system is the first step toward a parallel currency by which to bring about the eurozone’s end.

European politics around moneys is never boring.


100 years of first transatlantic flight..

June 14, 2019

Amazing to note this. Central Bank of Ireland has issued a coin commemorating the 100 years of first transatlantic flight.

As per wikipedia:

British aviators John Alcock and Arthur Brown made the first non-stop transatlantic flight in June 1919.[1] They flew a modified First World War Vickers Vimy[2] bomber from St. John’s, Newfoundland, to Clifden, Connemara, County Galway, Ireland.

The flight started on 14 June fom Canada and landed in Ireland on 15 June in 16 hours. has a piece on the anniversary.

Ironically, the flight was completed as we were nearing end of WW-I. Shows the complexity of human mind which is capable of both disasters and achievements.

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