March 2021 - Jan's notebook

Central bank mandates

In their paper Against amnesia: re-imagining central banking, Benjamin Braun and Leah Downey describe the elite consensus on central banking as a ‘holy trinity’. This holy trinity consists of (1) an independent central bank that (2) sets the short term interest rate to (3) achieve stable prices¹.

The fact that quantitative easing (QE) is still often called unconventional monetary policy speaks volumes for how deeply the holy trinity is ingrained in the minds of the community. However, more and more people are questioning this model of central banking².

Central bankers are almost begging politicians to spend more. A formal framework for fiscal and monetary coordination would do away with the fiction³ of central bank independence.

There’s an explosion of ideas for new instruments, from yield curve control to canceling debt to green TLTROs.

While almost nobody wants to ditch price stability, central bankers are taking on extra responsabilities based on local sensitivities. European central bankers (both at the ECB and the Bank of England) are making their institutions climate friendly. The Federal Reserve has had a dual mandate of price stability and full employment for a long time. The Reserve Bank of New Zealand will take house prices into account.

Although central banking post-holy trinity will have its own challenges, I, for one, welcome our central bank overlords.

European financial geography: personal experiences

The financial world isn’t flat. International firms tend to cluster in places where they are welcomed and where they find expertise. Here are some illustrations from my own financial transactions:

I bought Etherium in order to buy a tweet. My euros went to the bank account of Light Technology Ltd in Switzerland
I hired a designer on Fiverr (I’ll tell you why in the coming weeks). My payment went to Cyprus
I receive the royalties from the European sales of Bankers are people, too from an Amazon account in Luxembourg

Links spring 2021

Money laundering in the Democratic Republic of the Congo
The era of central bank convergence is over
How can the ECB unleash building renovations
Policy comes first, economic theory follows (JW Mason on Biden’s American Rescue Plan)
The Jersey Way
CLOs in Dublin
Primer on money-laundering (Bribe, Swindle or Steal podcast)
Corruption in the U.S. 7th fleet (Bribe, Swindle or Steal podcast)
Tommaso Valletti on how the EU anti-monopoly system works in practice (On the role of economic consultants arguing in favor of M&A: “They produce a glossy pamphlet with three nice pages: exactly what the judge needs, he can say ‘ah, here is a counter-argument, here is an anecdote to rebut this. So, nobody knows’.”; On the capabilities of the EU: “DG Comp has less than 1000 people for half a billion citizens.”)
Marbella, united nations of drug traffickers
Alessia del Vasto and Rachel Oliver on their campaigns to change central banking:

Luxembourgish companies and their owners

OCCRP published a series of articles on “OpenLux“. French newspaper Le Monde scraped a database with the ultimate beneficial owners (UBOs) of companies registered in Luxembourg.

To check the register yourself, go to the Luxembourg Business Registers website, click Portail LBR, click RBE, click Rechercher un dossier RBE. (I cannot provide a direct link, as the URL is time-sensitive and would show up as broken.)

The investigation did not find anything that shocks me. There is quite some research that shows Luxembourg is a popular location for holding companies (in addition to it being an investment fund center and a banking hub).

Something to keep in mind when reading such stories is that Luxembourg is quite transparent relative to its peers:

“According to EU regulations, member states were supposed to adopt publicly available beneficial ownership registers by January 10, 2020, but most have not done so. Luxembourg is one of only five member states to have implemented a register that is free and publicly accessible. The others are Bulgaria, Denmark, Latvia, and Slovenia.

Though other EU member states also have registers, seven have put up paywalls and 17 have not made theirs available to the public. The U.S. Corporate Transparency Act, which passed last month, calls for the United States to set up a UBO register as well, but it will be made available only to law enforcement.” (source)