Tag Archives: central banking

I would add to government accumulation the likelihood that as incomes rise in the East there will also be increased demand from households. There already is.  In the West, physical gold is mostly bling, with much of the saving in gold held largely in derivates as financial saving. And, as Jesse observes, the "paper gold" — "digital gold" really — is an issue owing to hypothecation and re-hypothecation. In the East physical gold doubles as ornament and real saving. In addition, in...

MMT economists have been saying that the government acting through its central bank has this power as currency monopolist to manage the yield curve in addition to setting the policy rate, if it chooses to use it.  What difference does this make? The 5 and 10 year rates serve as benchmarks for commercial lending. Since housing is such an integral part of the economy, mortgage rates are especially influential and it has been argued that central bank interest setting acts primarily through...

Gold buying like this functions as ‘off balance sheet deficit spending’. It’s off balance sheet as the payments by the CB don’t count as fiscal expenditures as they are accounted for as CB asset. And it’s functionally state deficit spending as the purchases add income in the form of net financial assets to the non government sectors: China’s on a bullion-buying spree. The world’s second-largest economy expanded its gold reserves for the fourth straight month, adding to optimism that...

It is Wednesday so very little blog writing today. One question I often get asked is what would happen if the bond market investors in a nation stopped bidding for the debt instruments being offered in the regular auctions. Interestingly, overnight I was sent some news from a Deutsche Bank information service written by their New York-based Chief International Economist, who signs himself off as “Torsten Sløk, Ph.D”. It related to these issues. The problem is that Dr Sløk seemed to want to...

On the other hand, a number of central banks have taken the dangerous approach of simply tailoring their message based on their audience: when speaking to technical experts, say one thing, and when speaking to the public, say another. The janus-faced SNB is a case in point. This rhetorical duplicity is important as it allows central banks to both assuage popular concerns over the stability of money, by fostering the illusion that they maintain control over price stability and monetary...

Some of the most interesting of that new work is from, and about, central banks. As an example, here is a remarkable speech by BIS economist Claudio Borio. I am not sure when I last saw such a high density of insight-per-word in a discussion of money and finance, let alone in a speech by a central banker. I could just say, Go read it. But instead I’m going to go through it section by section, explaining what I find interesting in it and how it connects up to a larger heterodox vision of...

The world’s central banks have acquired a record amount of gold in the third quarter of 2018 since 2015. The biggest buyer was Russia’s Central Bank, according to the World Gold Council (WGC) report. Over the past three months, global gold purchases totaled more than 148,000 tonnes, up 22% year-on-year, reports the World Gold Council. The leaders in purchases were Russia (99.2 tonnes of gold) and Turkey (18.5 tonnes).Russia’s central bank gold reserves surpassed 2,000 tonnes for the first...

If we abolish money from economic theory, what replaces it? The answer is: financial assets. Although this might be viewed as a superficial change, there are important implications. In particular, the central bank can manipulate the amount outstanding of some types of financial assets, but it cannot control all of them. We end up with a more realistic view of central bank power. They no longer control “money” and hence all commerce, rather they are reduced to worrying about setting interest...

A bit wonkish (but no math), but interesting if you are into interest rates and how they affect the economy.Bond Economics No More Neutral Rate?Brian Romanchuk

The dangers of distorting free market interest rates is one of the bits of market folklore that keeps getting passed around. There is actually not a whole lot of data to defend this view; it is best viewed as faith-based reasoning. This topic is particularly interesting in the case of Japan. I am somewhat agnostic on this issue; I do not see particular risks from manipulating the yield curve in the current environment, yet I can see some plausible dangers. This article was triggered by the...