Extended talk on monetary macroeconomics in Seattle. My pres starts 34 minutes in. http://t.co/lpTYBmosP7
11 minutes ago
Archive for September, 2011
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This ‘Competitiveness’ Thing Is a Scam
What is ‘competitiveness’? It’s an important part of the euro area leaders’ negotiated terms in the July 21st Summit announcement by the European Heads of State. The first paragraph, #4, and #11 of the announcement all refer to this issue of ‘competitiveness’: We also reaffirm our determination to reinforce convergence, competitiveness and governance in the [...]
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Europe’s Banking Crisis Is No Longer a Liquidity Crisis, nor Is It a European Version of ‘Subprime’ – It’s a Sovereign Coordination Crisis
I often hear that Europe is trying to avoid its ‘Lehman event’, or that the PIIGS euro area bonds are the European equivalent of subprime bonds. Rather, the European banking crisis is centered on a failure of public coordination that’s made explicit and implicit holdings of sovereign assets a risk to even the healthiest of banks. First, why euro [...]
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Linking Sovereign Risk to Corporate Credit Spreads in Europe
Financial firms in Europe and the US are hitting crisis mode, as illustrated by relative borrowing costs, spreads, to comparable government bonds (see financial spreads chart to left and click to enlarge). World policy leaders anxiously await – and some promise to deliver – a solution to the euro area sovereign debt crisis at the [...]
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Europe: Why the One-Size-Fits-All Solution Won’t Work
I’d like to remind the Troika – the ECB/EU/IMF – that their one-size-fits-all (OSFA) solution won’t work for every economy in the euro area. OSFA: forced fiscal consolidation for each euro area country that falls into the throes of a liquidity crisis, thereby finding themselves in need of funding at “reasonable” rates. First it was Greece [...]
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The European Debt Crisis in Charts
I present some basic statistics to highlight the problem in Europe. In short, there exists a deleterious positive feedback loop between overly leveraged banks and their sovereigns in key markets. Exhibit 1: European Banks are overly levered. Spanning 2006 through the latest data point, key European banking systems – France, Germany, and Italy – increased [...]
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The ECB Data Do Not Support the View that European Banks Are Moving Cash Assets out of Europe and into the U.S.: It’s the Fed’s QE2, That’s All
Kash Mansori published complimentary articles that received quite a bit of attention in the blogosphere. Using data published by the ECB and the Fed, Kash Mansori argued (here and then here) the following: monetary financial institutions (MFIs) in Europe have been moving their deposits out of European banks. Where is that money going? It looks [...]
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Spanish Consumers AND Savers Take a Forced Siesta
Recently we saw retail sales figures come out of Spain, Germany, France, and Italy. Across Europe, the seasonally-adjusted pattern of real retail sales is diverging. The chart above illustrates the real seasonally-adjusted and working-day-adjusted (for Europe) level of retail sales across key countries in Europe and the US (for comparison). The raw data is indexed [...]
