tag:blogger.com,1999:blog-8732662769765511163.post1581062479652504269..comments2023-07-31T11:06:29.485+02:00Comments on Transition: Irreversible EuroD. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-8732662769765511163.post-72696326660695938962012-09-14T22:17:55.762+02:002012-09-14T22:17:55.762+02:00Bernanke is trying to stimulate investment and emp...Bernanke is trying to stimulate investment and employment, by reducing the long term interest rate, and he is allowed to operate on the longer term (and any other) market segment. <br /><br />Draghi is allowed to operate in the shorter setment of the market, in order to mobilise efficient mechanisms of monetary transmission. He is not allowed by the ECB Statutes and the Treaties to monetise government debt, which is what would be implied if he purchased long term bonds (or if he rolled over shorter term bonds, something which has not been tested yet, though he might try in an emergency, just like the Bundesbank did in 1975).D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-31131060192770722302012-09-14T17:10:50.330+02:002012-09-14T17:10:50.330+02:00Bernanke is concentrating on the long end of the F...Bernanke is concentrating on the long end of the Fed's latest round of quantitative easing. Why does Draghi, on the contrary, concentrate on the short end of the bond market (up to 3 years)?Davidnoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-64455051171458554042012-09-14T15:14:52.276+02:002012-09-14T15:14:52.276+02:00For the English version of the Federal Constitutio...For the English version of the Federal Constitutional Court judgement of 12/09/2012, see http://www.bverfg.de/entscheidungen/rs20120912_2bvr139012en.html D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-69059406158077130912012-09-14T11:42:02.775+02:002012-09-14T11:42:02.775+02:00Of course, Eva. Mind you, the fact that the German...Of course, Eva. Mind you, the fact that the German Constitutional Court did not oppose the ESM or the OMTs has been widely regarded in the German Press as a sign of weakness and withdrawal on their part. <br /><br />Wolfgang Janisch writes in today's Suddeutsche Zeitung that the German constitutional court has so far refused to take matter to the European Court of Justice, for fear of losing its own influence (today's Eurointelligence.com). D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-57992925689422435412012-09-14T11:19:59.135+02:002012-09-14T11:19:59.135+02:00The problem is not that those nine persons are une...The problem is not that those nine persons are unelected, for most constitutional judges are appointed rather than elected, but that nine German citizens appointed by Germans should decide the future of Europe, instead of the European Court of Justice or some such all-European institution. Evanoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-50507664705122806692012-09-14T07:54:19.856+02:002012-09-14T07:54:19.856+02:00Definitely a democracy deficit, Bob, when nine une...Definitely a democracy deficit, Bob, when nine unelected persons dressed in scarlet robes and wearing funny hats can decide the future of the euro. <br /><br />Credible pre-commitments by democratically elected governments at least are a way of bringing forward the benefits of future austerity. <br /><br />And it is open to question whether the respect of budgetary constraints, and its associated effect on borrowing costs in financial markets, is an infringement of democracy or just a fact of life, like the laws of thermodynamics. D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-56254653066676443982012-09-14T06:54:28.051+02:002012-09-14T06:54:28.051+02:00Why have elections, if the basic economic policies...Why have elections, if the basic economic policies of elected governments are pre-determined by international organisations like the Troika? Clearly there is a democracy deficit in Europe today.Bobnoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-43222981898329364852012-09-13T11:17:04.207+02:002012-09-13T11:17:04.207+02:00Debbie: what matters for debt sustainability is th...Debbie: what matters for debt sustainability is the relationship between interest and growth rates. If OMTs lower the average interest rate paid on government debt and therefore free resources to fund the resumption of growth, their effect can only be positive, even though - ceteris paribus - shorter average maturity involves greater vulnerability. Lower interest and higher growth do not correspond to ceteris paribus. <br /><br />Will: I am not endorsing the TSCGEMU (damn Euro-acronyms). Of course fiscal consolidation ideally should be slower, more gradual and steadier, and made more effective by credible pre-commitments, with respect to what it is stipulated in that Treaty. But it is hard to contemplate the unlimited funding of digging holes to fill them with banknotes at this stage. And the drop in government bonds yields that followed the OMTs announcement (over 100 points for Italy and Spain in sheer announcement effect, before a single cent was spent or committed) is large enough to allow for the resumption of some growth promotion, thus alleviating the recessionary impact of austerity. <br /><br />Kurt, it is nearly $1.30 today, actually. Good for lowering inflation, and bad for competitiveness and foreign trade, unless it cools industrial relations and money wage settlements. <br />D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-45610950998746782082012-09-12T21:00:48.594+02:002012-09-12T21:00:48.594+02:00The euro rose to $1.2906, its highest level since ...The euro rose to $1.2906, its highest level since mid-May. Is this a good thing?Kurtnoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-21399522653027974582012-09-12T19:51:22.617+02:002012-09-12T19:51:22.617+02:00You seem to endorse the Treaty on Stability, Coord...You seem to endorse the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, euphemistically called the Fiscal Pact. But this is nothing of the kind, only an anti-Keynesian recipe for a Europe-wide (and indeed global)recession.Willnoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-35757011715933408292012-09-12T19:37:26.477+02:002012-09-12T19:37:26.477+02:00Even if falling yields on under-three-years-maturi...Even if falling yields on under-three-years-maturity bonds are followed by falling yelds on longer dated bonds, as you suggest, there would still be an incentive for governments to reduce the average maturity of their debt, thus making themselves more vulnerable. Debbienoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-78583029010783607742012-09-12T17:22:29.659+02:002012-09-12T17:22:29.659+02:00Obviously any attempt at permanent sterilisation i...Obviously any attempt at permanent sterilisation is problematic against the framework of possible Long Term Re-financing Operations. And otherwise sterilisation can be costly. <br /><br />But nobody can seriously argue that the current threat to the Eurozone is inflation, instead of a terrible depression, so OMTs cannot do any damage even if they were not fully sterilised.D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-25885521056437068452012-09-12T16:30:57.879+02:002012-09-12T16:30:57.879+02:00Doubts have also been expressed about the feasibil...Doubts have also been expressed about the feasibility of sterilisation. Is that not a problem?Tomnoreply@blogger.com