Finance

Perry and I extend our apologies for the unplanned hiatus. By way of breaking radio silence, it seems appropriate to check in on our two favorite banks.

A money view of SDRs

From a money view perspective, the central issue is settlement of TARGET balances between national central banks within the Eurozone, and the key is to understand TARGET balances as a kind of interbank correspondent balance.

The current account still matters, but other things do too, and maybe more. In light of recent focus on gross flows, here and elsewhere, I want to argue for the language of the balance of payments.

The title is the same as that of Maury Obstfeld’s Ely Lecture, delivered Jan 6 at the AEA meetings in Chicago. Yours truly was at the meetings mainly to deliver a paper on “Three Principles for Market-Based Credit Regulation”, about which more in a later post. And for most of the rest of the time I was locked in a hotel room interviewing candidates for an assistant professor slot at Barnard College (which gave me a good overview of the current state of macroeconomics, again fodder for a later post).

A correspondent sends us to a column of Paul Krugman’s that asserts that “nobody understands debt”. Fair enough.

When I started this blog, almost exactly one year ago today, my thought was to provide commentary on the financial events of the day, using the Financial Times as my primary source of information about those events.

This research project studies the endogenous emergence of systemic risk and bubble-and-burst dynamics and the transmission of financial shocks to the real economy.

This research project constructs a new theory of the relationship between law and finance through using case studies drawn from the global financial crisis as analytical windows for determining deficiencies of established theoretical frameworks

This research project develops a comprehensive research agenda to formulate proposals that will help make the financial sector sustainable and facilitate a transition to sustainable economic development.

As we prepare to digest the implications of this week’s ECB move, it seems worthwhile to take a look at the monetary economics of fixed exchange rates.

[The following guest post is by John Whittaker, from whom we have learned much of what we know about how the European payments system works. See his terrific papers here and here, both of which reward close study. He has been looking over the last couple Money View posts, and the comments to those posts, and has this to say.]

Why is the IMF getting involved in the Eurocrisis, and why is its involvement taking the form of lending to individual member states of the Eurozone?

The ECB has always been the protagonist of the eurozone crisis story.

The fact of the matter is that European bank funding markets are collapsing onto the ECB balance sheet.