Monthly Archives: September 2012

Claire Jones

Think you could do a better job than Sir Mervyn in setting interest rates and staving off financial crises? Well here’s your chance.

George Osborne today began his search for a new Bank of England governor and the following ad is due to appear in The Economist on Friday: Read more

Claire Jones

Ian McCafferty, who has replaced Adam Posen on the Bank of England’s Monetary Policy Committee, appeared before the House of Commons’ Treasury Select Committee this morning.

The hearing provided some interesting insights on McCafferty’s opinions on fiscal, as well as monetary, policy. Read more

Claire Jones

Mirror, mirror on the wall, who’s the biggest quantitative easer of all? Brazil has long accused governments in the developed world of using loose monetary policy to pump up their economies and get a competitive edge. But it may be time for Brazil to reflect on its own actions over the past five years.

During that time, Brazil has received huge capital inflows, pushing its foreign reserves from about $80bn at the end of 2006 to about $380bn today (see chart below). The central bank says it has “sterilised” those potentially expansionary and inflationary inflows by selling government bonds – standard practice at central banks around the world.

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Michael Steen

Watching the panel discussion on BBC’s Newsnight programme after the ECB’s announcement of its Outright Monetary Transactions policy last Thursday, a long-running criticism of central bankers was brought powerfully home even before any of the guests had opened their mouths.

For here was an all-woman group of qualified observers discussing decisions made in an environment so male-dominated it might as well be one of London’s traditional gentlemen’s clubs in St James.  The ECB has no women on its executive board and none of the 17 heads of eurozone central banks that join the executive board on the bank’s rate-setting governing council is led by a woman. And the ECB is far from an exception — women are exceptionally rare in central banks the world over.

Economists love to portray themselves as iconoclasts who follow the evidence and act rationally. So why is central banking gender politics so 19th century? Read more

Claire Jones

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More QE from the Fed?

Will we see the Federal Reserve restart quantitative easing next week? Read more

Chris Giles

There is a chart regarding the UK economy which has become so ubiquitous it is known in our office simply as “the Niesr chart”, because it is often republished by the National Institute of Economic and Social Research. It is supposed to be a clear and concise account of Britain’s recent economic woes, putting the recession into accurate context of past recessions. It shows the current recession as the longest and nearly the deepest since the start of the 1930s. People don’t generally know that in the UK the 1920s recession was much worse, but I’ll leave that for now.

Here is the latest version of “the Niesr chart”, published today. Take a good look at it before I tell you why I have begun to become irritated by it.

It is arresting because it does most things right. It is simple to understand. It is clearly drawn and obviously in context. The problem is that that the Niesr chart might be showing us irrelevant nonsense. It is also not a sufficient description of the UK’s recession. Read more

Claire Jones

Luxembourg’s Yves Mersch, left, arriving at an ECB executive board meeting in Finland last year.

Yves Mersch’s path to a seat on the European Central Bank’s powerful six-member executive board has been rocky.

The head of the Luxembourg central bank was, at first, not even considered a leading candidate for the position, which was being vacated by a Spaniard and, Madrid assumed, would be filled by a Spaniard. But a caucus of northern European countries balked at putting another southerner on the board, so inflation hawk Mersch became their candidate.

That set off months of nasty backroom battles, where the Spanish insisted on compensation – at one point they held out for the head of the new €500bn eurozone rescue fund, which was supposed to go to German economist Klaus Regling – in exchange for acceding to Mersch. Luxembourg retaliated by holding up plans to give Spain more time to hit tough budget targets.

In the end, the northerners won out. Mersch was nominated, and Spain was left empty handed. Everyone thought the fight was over. Everyone thought too soon: this morning, the European Parliament announced it was postponing Mersch’s confirmation hearing scheduled for Monday because no women candidates were considered for the job.

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Claire Jones

For obvious reasons, trying to come up with any reliable inflation in North Korea is tricky.

In an authoritative new study on hyperinflation*, economists Steve Hanke and Nicholas Krus attempted to do so in a fascinating way.

The evidence is far from conclusive, but by examining the foreign exchange black market and by observing changes in the price of rice, the research suggests that North Korea suffered a bout of hyperinflation between December 2009 to mid January 2011. At its height, in March 2010, prices might have risen by a staggering 496 per cent over the course of a single month.

Though the research cannot firmly conclude whether or not North Korea experienced a bout of hyperinflation, the economists manage to pull together enough reliable data to reveal there have been far more episodes of hyperinflation than commonly thought.

Uncovering episodes of hyperinflation is fraught with difficulty as they tend to happen in extreme conditions and in parts of the world where the data is not altogether reliable. Read more

Robin Harding

The fourth paper at Jackson Hole, by Princeton economists Markus Brunnermeier and Yuliy Sannikov, is about the redistributive effects of monetary policy — although I think that will mislead people as to its content.

It is not a paper about how low interest rates and QE redistribute wealth from savers to consumers. Instead, it is a paper about how a crisis damages banks and how monetary policy may be able to mitigate some of the negative effects by redistributing wealth to recapitalise them. Read more