SAO PAULO | By Marcus Nunes via Historinhas | David Beckworth has a very good article “Inflation Targeting – A monetary regime whose time has come and gone.” A very short summary of the argument is given here: “What, then, would characterize a robust monetary-policy regime? Based on the discussion above, it would be one that does not respond to supply shocks, but does vigorously respond to demand shocks.
ATHENS | By Nick Malkoutzis via MacroPolis | A newspaper article on Sunday, quoting an allegedly secret report by officials at Greece’s General Accounting Office and the Hellenic Statistical Authority (ELSTAT), claims that the country’s deficit figure in 2009 was “over-dramatised” (or “sexed up” if you prefer) by the PASOK government that took over in October of that year.
MADRID | By J.P. Marín Arrese | The troubles faced by Banco Espirito Santo ’s main share holding group have delivered a widespread blow to financials and periphery sovereigns. A nasty reminder that Eurozone doesn’t seem so stable as everyone bet it was. Investors are flying to safety, pushing the US Treasuries and German bunds close to past records. Stock exchanges and market sentiment are bound to undertake brisk U turns, at no warning. The more so as sharp and continued rises always offer a good excuse for a sell-off. There is nothing to worry about.
LONDON | By Víctor Jiménez | The image of the Bank of England’s monetary policy Committee, which met in early July to not issue any decision on interest rates, was at the same time historic and false.
SAO PAULO | By Marcus Nunes via Historinhas | The depression may not be “Great”, but it has certainly been “Prolonged”. And like many things, good or bad, that persist, people “get used” to it! And there are those, like the BIS, who think that deepening the depression is worth it if it means reducing the risk of another financial crisis! The world´s major central banks have certainly caused a lot of damage by tightening money in the face of imaginary inflation dangers, but at least they are shrugging off the BIS “recommendations”.
WASHINGTON | By Pablo Pardo | The Monty Python are back in London, and one of their most famous sketches revolves around the phrase “nobody expects the Spanish Inquisition.” The Bank of International Settlements (BIS) is like the Spanish Inquisition, only less funny and more predictable than the British surreal comedy group: it is the bearer of orthodoxy, even if it means sending everybody to the stake. Its prescriptions are suicidal in economic terms, wrong from a moral point of view, and unjust from a societal perspective.
SAO PAULO | By Marcus Nunes via Historinhas | That´s what Simon Wren-Lewis does in “Taylor Rules, the ZLB and Euro Diversity”: John Taylor originally suggested his rule as both a good guide to what central banks actually do and also one that “captures the spirit of the recent research”. It has been used ever since as a yardstick by which to measure monetary policy.
ZURICH | By The Corner | As expected, the ECB did not unveil any new policy measures on Thursday. Although the Bank maintains an easing bias, it signalled that it wants to wait and see how the monetary stimulus delivered last month unfolds. UBS’ base case scenario remains that ECB rates will stay on hold for the foreseeable future and that QE will not be deployed. The key news from ECB’s meeting was more of a technical nature.
MADRID | By Francisco López | The ECB President announced with fanfare last month a battery of measures to revive the credit in the EZ. The problem is that the open bar announced by Draghi won’t have an impact on loans until 2015 and, meanwhile, credit fall continues to accelerate in some peripheral countries, especially in Spain and Italy. There are those who believe that the latest data could force Mr Draghi to approve a direct debt purchase program before year’s end.
MADRID | JP Marín Arrese | The revised growth figure for the US economy in Q1 comes as a nasty surprise. It has dampened market sentiment worldwide. Earlier assessments blaming bad weather the moderate setback no longer hold when faced with a downturn close to 3%. Even discarding a fallback into full-fledged recession, it undoubtedly points to a markedly weaker performance than expected. The Fed tapering strategy is confronted with a baffling dilemma.