Central banking analogies

Economists are fond of analogies to describe technical ideas.

Most of those analogies are confusing and/or useless. As I wrote in the introduction of Bankers are people, too:

Economists and journalists writing for lay audiences tend to use metaphors when explaining financial concepts. For example: ‘Cheap credit is like heroin. It’s addictive, and the economy can overdose from it.’ That may sound nice, but what does it even mean?

Continue reading “Central banking analogies”

Grazie mille, dottore Draghi!

ECB President Mario Draghi has answered a number of questions from the public. People could tweet #AskDraghi to join.

I’m honored that the ECB also picked one of mine 🙂

The website Debating Europe has listed all the replies of Dr. Draghi.

I only wish the ECB President would have responded to this question as well 😀

Banken zijn nu veel veiliger dan in 2008

“Bankiers hebben niets geleerd uit de crisis.”
“Er is niets veranderd in de financiële sector.”
“De risico’s zijn nu nog veel groter dan in 2008.”
“Er komt een nieuwe bankencrisis aan.”

De bankencrisis van 2008 heeft diepe sporen nagelaten. Bij velen leeft het gevoel dat er niet veel veranderd is. Dat is ook de teneur van een recent opiniestuk van professor Ewald Engelen in Trends. De banken zijn nu echter veel veiliger dan tien jaar geleden. Continue reading “Banken zijn nu veel veiliger dan in 2008”

Negative rates: a massive transfer from savers to bank shareholders and governments with little impact on economic growth. (Post in response to Miles Kimball)

This post explores the consequences of deeply negative interest rates set by the ECB, as proposed by professor Miles Kimball. It’s a shorter version of my previous post, plus an estimation of the economic stimulus of the proposal. Continue reading “Negative rates: a massive transfer from savers to bank shareholders and governments with little impact on economic growth. (Post in response to Miles Kimball)”

Green infrastructure bonds with macro strings attached: How the ECB could fulfill its mandate by fighting climate change

This is the paper I submitted to the Central Banking and Green Finance workshop organized by the Council on Economic Policies (CEP) and De Nederlandsche Bank. I wrote it to stimulate a discussion about how central banks can contribute to the fight against climate change. The text does not necessarily reflect my personal opinion. Continue reading “Green infrastructure bonds with macro strings attached: How the ECB could fulfill its mandate by fighting climate change”

Europe and Japan: Monetary policies in the age of uncertainty (notes)

On 2 October, think tank Bruegel and Kobe University organized a conference on monetary policy in Brussels. The speakers compared the challenges faced by the European Central Bank (ECB) and the Bank of Japan (BoJ). This post is a reminder to myself based on my notes. I don’t cover the contributions of all participants. Don’t expect a story or a conclusion 🙂 Continue reading “Europe and Japan: Monetary policies in the age of uncertainty (notes)”

Een nieuw mandaat voor de ECB?

Gisterenmiddag (26 juni) organiseerde Leergeld haar tweede evenement in Brussel. Leergeld, een initiatief van Europarlementslid Sander Loones (N-VA), wil mensen bewust maken van de impact van de Europese Centrale Bank (ECB) op hun financiën.

Het thema van de bijeenkomst was Een nieuw mandaat voor de ECB?. Twee eminente sprekers, Pascal Paepen en professor Lex Hoogduin, presenteerden hun visie op het beleid van de ECB. Continue reading “Een nieuw mandaat voor de ECB?”

Baby steps towards more ECB accountability

Transparency International EU has published a report about the European Central Bank (ECB). The author of the report, Dr. Benjamin Braun, has analyzed the independence, transparency, accountability and integrity of the ECB.

Several media organizations covered the findings.

The launch of the report was accompanied by a symposium in Brussels on Tuesday. During an interesting panel discussion, it was debated how the ECB can improve the way it works. Carl Dolan and Leo Hoffmann-Axthelm from Transparency International EU stressed that the ECB had cooperated with the NGO.

Benoît Cœuré addresses the room. Source.

Many topics were covered during the discussion. For example the status of whistleblowers, freedom of information requests, and the “cool-off period” demanded when ECB executives move to the private sector.

But my main interests were monetary policy and the ECB’s supervision of the banking sector. Continue reading “Baby steps towards more ECB accountability”

What I like about America, finance edition

Or to be more precise, debate about the financial institutional framework edition.

How should banks be regulated? Ten years ago, this question would have only interested a few specialists. Discussions about bank supervision and the role of the central bank were way too boring for the general public1. Besides, bankers surely knew what they were doing?

The global financial crisis and its aftermath changed this complacent attitude. The existing rules did not prevent the worse financial crisis since the 1930s. Governments had to bail out banks at a moment’s notice. Politicians took drastic decisions during the panic of September 2008. While those actions were taken with little democratic oversight, national leaders2 were the only agents willing and able to stop the collapse.

The crisis spurred a thorough update of bank regulation. Both in the United States and in Europe, legislation was passed to make banks safer. Avoiding a repetition of ad-hoc bailouts became a priority. The U.S. got its Dodd-Frank Act. The European Union (EU) set up the European Banking Authority (EBA) and worked towards a banking union3. America and Europe implemented capital and liquidity standards based on the Basel III recommendations. Continue reading “What I like about America, finance edition”

ECB should give money directly to citizens

The European Conservatives and Reformists (ECR) group in the European Parliament recently launched “Leer Geld”, an initiative led by MEP Sander Loones, to raise awareness about the effects of the monetary policy conducted by the European Central Bank (ECB).

The initiative is to be welcomed: monetary policy is too often overlooked by civil society, yet its impact on our lives has never been greater. Under its “quantitative easing” programme (QE), the ECB has been buying large quantities of government bonds since 2015. Surely injecting the equivalent of 20 percent of GDP into the eurozone finance sector cannot be without consequences. (continue)

You can read the full article written by me and Eric Lonergan at EUobserver.