Jürgen Stark will resign as European Central Bank executive board member. But his compatriot, Jens Weidmann, Bundesbank president, has signalled he will keep up his fight against the ECB’s government bond buying programme. Eurozone central banks were already carrying considerable risks on their balance sheets. “I believe strongly that from now on these should be reduced again and in no way expanded,” he said in a speech in Cologne on Tuesday evening.
Mr Weidmann also had a strong message for German politicians. The time was fast approaching a fundamental choice would have to be made about the future of the eurozone. Read more
This is a question that is exercising central banks and politicians around the world when it comes to quantitative easing.
Creating money is clearly a monetary operation - only a central bank has a monopoly right to issue base money. What you do with any money created is much more of a moot point as Adam Posen argues in a speech today.
One line to draw is on taking risks. As Mr Posen states, the Bank of England has drawn its line here:
“Getting into credit risk assessment through buying specific assets both is not a strength of the Bank, and would expose the Bank excessively to the perception of favoring specific interests”.
Adam Posen’s speech today – in which he argues for more quantitative easing and new forms of QE – raises two important issues which I will cover in two posts. Here I will discuss words and deeds at the Bank of England’s Monetary Policy Committee. My second post will cover Mr Posen’s calls for more exotic forms of QE.
A big problem the MPC is causing for those seeking to understand UK monetary policy is that confusion reigns about what it would take to trigger QE2 in Britain. And as so often recently, this is because the Bank of England appears to find evidence to justify policy decisions rather than allow evidence to guide policy. Read more