How to control those central bankers
Stop treating people like donkeys!
Last Tuesday I went along to the Adam Smith Institute to listen to Brendan Brown launch his new book, “The Global Curse of the Federal Reserve”. Brendan picked out three channels through which central banks’ ultra-low interest rate polices can trigger asset price inflation (followed invariably by a crash): Central bank pegging of…
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Bank of Japan enters the money trap
Sad to see Japan joining the currency war
The first thing to say about Haruhiko Kuroda, nominated as the next governor of the Bank of Japan, is that he is a very nice man. Whenever I have met him, he has been not only modest and friendly, but also ready, willing and able to discuss policy issues and ready to modify his opinion…
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Nonsense on bank pay
The solution? Encourage alternatives to banks
Antony Jenkins, who replaced Bob Diamond as chief executive of Barclays Bank during the Libor scandal, says that Barclays should be seen as a bank that is “doing well financially and behaving well”. Now Sir David Walker, the urbane chairman (and G30 alumni) and Jenkins hope that by revealing the numbers earning more than £1…
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The ECB should cap the euro
The current monetary system threatens the open trading order
Governments of the Euro area and the ECB must not let the euro strengthen to the point where it threatens the euro area recovery. It should not rise above $1.40 – it is now at $1.31. When the euro strengthened sharply in 2009, it triggered weakness that led to the euro sovereign debt crisis. But…
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Why Asia did not cause the financial crises
A good GFS can sustain global imbalances safely
New attempts are being made to resuscitate the “savings glut” hypothesis of the origins of the great financial collapse and recession and the eurozone’s agony. This hypothesis is wrong. What matters is not saving but financing. Countries running current account surpluses do not finance those running current account deficits.The deficits are financed…
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Christine Lagarde gets it wrong
This is sad, because if you don't urge system reform, nobody will
“The financial system can work if each of its members follow the right principles for their economy” M Lagarde has had a successful year at the Fund but this statement at the G20 meeting in Moscow yesterday shows the Fund has not learnt the key lesson of the economic disaster. The mistaken…
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The G30 plays blind man’s bluff
The G30 has flinched from tackling the big obstacles standing in the way of long-term finance
Watching governments, central bankers and economists explore the remaining ruins of the old pre-2007 economic structure is like watching children playing a game of blind man’s bluff. Being blindfolded, they cannot see what is around them, and are compelled to rely on their other senses. Much amusement is to be had for the onlookers,…
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The turning point for gold – now what?
Gold has staged a dramatic comeback. How did the change come about? What's next?
Following my last post on gold, I got several comments: for and against. One said that the real reason gold has come back over the past 10 years is that central banks have stopped selling and started buying again. Indeed! Net gold purchases by central banks in 2012 were 534 tonnes –…
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Bury inflation targets and get a real monetary framework
How much agony do we have to endure first?
To wean central banks from inflation targeting you’ll have to snatch it from them by force; they are clutching it ever more tightly to their breasts. But they must bid it a tearful goodbye. The big question is what will replace it. Mark Carney has said that: “Flexible inflation targeting is the most successful…
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The Fed at 100
The Fed keeps on making the same mistakes
The Federal Reserve Act was signed into law by President Wilson on December 23 1913. Its purposes were “To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.”…
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