Monthly Archives: August 2011

Krugman on “Republican Science”: Can we please make a trade barrier against that?

This is an endorsement. Paul Krugman’s recent Op-Ed in the New York Times describes in horrifying detail how some parts of America, and potential Republican Presidential candidates are turning their back against science. The piece, Republicans Against Science, is really scary. Read it and weep. The Wall Street Journal editorial by a Stephen Moore that Krugman mentions, can be found here. It is also a horrifying read. It basically says that economics is stupid, and common sense is better. Weep some more. It is scary right now for me, as my country have an election campaign where main issues are economic. And since American tendencies inevitably are imported in Europe … Continue reading

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ECB public debt purchases by numbers

I wrote last week about the ECB’s renewed purchases of public Euro debt (in particular Spanish and Italian). Now the actual numbers are out, and the confirm what market participants signaled: The ECB was not in for a small operation. The ECB purchased for around 22 billion Euros, thereby raising its stock of debt purchased under the Securities Markets Programme to 96 billion Euros. An unprecedented increase in the stock of almost 30 %. Today, the ECB will suck up the associated liquidity created (and will do so the next week, and the next . . . ). From a weekly perspective, the operation appeared successful as bond yields have … Continue reading

Posted in Economics, Monetary policy | Tagged , , | 1 Comment

Commitment in action: Federal Reserve’s interest-rate “path”

It is a big shame that today’s FOMC meeting is one of those not to be followed by a press conference and a Q&A with Ben Bernanke. The policy decision is one of the more spectacular in recent times. Not because the Fed decided to keep the target for the Federal Funds Rate within the 0–0.25% range, where it has been since December 2008. The big news, however, is that the non-move is accompanied by an explicit commitment to keep it there for the next two years (if current conditions continue). This is very specific compared to previous talk about keeping rates low for “an extended period” (which has been … Continue reading

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ECB buys public debt again: Otmar Issing voices strong critique

In a rare Sunday press release (August 7) , the President of the ECB, Jean-Claude Trichet (on behalf of the Governing Council), hailed the fiscal and structural measures of Spain and Italy and their commitments—along with other member countries—to strictly adhere to “fiscal targets”. Then he emphasized that countries are sovereign states that themselves should honor their own “signature as a key element in ensuring financial stability in the euro area as a whole“. (Oh, and he supports the joint statement of the same day by France and Germany, which is not surprising given the occasional word-by-word similarities.) Then he concludes that the Securities Markets Programme (SMP) will be activated. … Continue reading

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US of AA+

Rarely has a rating agency’s rating of a single country been met with such anticipation and followed by so much commentary. On August 5, Standard & Poor’s downgraded US long-term sovereign debt from the maximum of “AAA” to “AA+” adding an “Outlook Negative” to the picture. As mentioned all over the press, this is the first time to happen. What is particularly interesting about the downgrade is the motivation. Surely, United States has a huge public debt—of a size that causes even the most Keynesian-minded economists to take it seriously. But the motivation is barely economic at all. As seen in “Research Update: United States of America Long-Term Rating Lowered … Continue reading

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