The Greek government has just confirmed Lucas Papademos, the European Central Bank’s vice-president, met with George Papandreou, the Greek prime minister, in Athens at the weekend. Perhaps that is not surprising – Mr Papademos is Greek and might not want to spend every weekend in Frankfurt. But I imagine that they had quite a lot to talk about. Read more
In a characteristically combative speech today, Adam Posen, an external member of the Bank of England’s Monetary Policy Committee, insists interest rates are a blunt tool for combating asset price bubbles. He suggests property taxes instead, writes Chris Giles of the Financial Times, but fails to analyse whether these would work any better than interest rates Read more
$172bn is too big a number to ignore. Marla Singer has trawled through footnotes and found that the Fed may be exposed to European banks via swap agreements made by the banks with failed insurance giant AIG. It’s not definite, but it’s big if it’s true.
The argument runs as follows: (1) European banks arranged swaps with AIG Read more
Politicians around the world are putting increasing pressure on their central banks. It is changing their behaviour from Japan to the UK. Some of the greater scrutiny is welcome, writes Chris Giles of the Financial Times, but having central banks under constant pressure from politicians is a retrograde step. Read more
With deflation entrenched and the yen’s rise against the dollar worrying exporters, speculation swirled that the BoJ was about to announce a return to “quantitative easing” or at least an increase in its government bond-buying programme. So when all the policy board offered was a sideshow offer of cheap three-month loans to commercial banks, the sense of anti-climax was palpable. Read more
I’ve been talking to some longtime Fed watchers ahead of Bernanke’s re-confirmation hearing on Thursday and I’m struck by how bad Fed-Congress relations are. Meltzer – the unofficial historian of the US central bank – tells me the situation is worse than at any point in the Fed’s history. There is real concern that some of the proposals before Congress to curtail the power of the Fed and curtail its independence will end up becoming law.
This is a tragedy not just because some of these proposals (not all) could do real harm, but because the desire to cut the Fed down to size is forestalling discussion of issues I think should be high on the post-crisis agenda for the institution. Read more