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Asunto: News Around The World
Honestly guys, I'm sick and tired of the flaming between the 2 of you. Post the news that is allowed, discuss it without deteriorating each others opinions and stop going "on the man" instead of "on the news".
Furthermore, If anyone needs to be corrected about his or her behavior on the forum, the MODs and admins will arrange the necessary.
Consider this a final warning!
Furthermore, If anyone needs to be corrected about his or her behavior on the forum, the MODs and admins will arrange the necessary.
Consider this a final warning!
Billionaire investor George Soros has warned that the aggressive stimulus policy rolled-out by the European Central Bank (ECB) could "reinforce inequality" in the EU.
http://www.bbc.com/news/business-30943216
Sad true. I am just wonder, after ECB will start buying national bonds, what about the situation that country will not need new extra cheap bonds? So ECB will just help to those who are making loans and loans and productive and responsible countries will just get inflation?
But I am not sure what rules this action (buying national bonds) are.
http://www.bbc.com/news/business-30943216
Sad true. I am just wonder, after ECB will start buying national bonds, what about the situation that country will not need new extra cheap bonds? So ECB will just help to those who are making loans and loans and productive and responsible countries will just get inflation?
But I am not sure what rules this action (buying national bonds) are.
Worrying about countries issue more bonds "because it's cheap" in the present European context is like worrying about unemployed workers not searching hard enough for a job when unemployment is 25%.
Unfortunately, this measure may create more enthusiasm than real effects, asi it is not really an aggressive "stimulus", and it will hardly have any impact on inflation.
Unfortunately, this measure may create more enthusiasm than real effects, asi it is not really an aggressive "stimulus", and it will hardly have any impact on inflation.
the ecb is not a real central bank and eu is not a country.
Those problems can't be solved by Draghi.
He do what everyone else would do in his place.
this Q.E. is very funny in some facts, for example (source) :
-The ECB and the central banks of euro zone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.
-"There was a consensus on risk-sharing set at 20 percent and 80 percent on a no-risk-sharing basis," he added.
(editado)
Those problems can't be solved by Draghi.
He do what everyone else would do in his place.
this Q.E. is very funny in some facts, for example (source) :
-The ECB and the central banks of euro zone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.
-"There was a consensus on risk-sharing set at 20 percent and 80 percent on a no-risk-sharing basis," he added.
(editado)
Yes and know. He did (more like the EU did, but OK :P) what he can convince others to do, which may or may not be what he wants to do. In any case, it may still be useless, in which case it won't be better (nor worse) than not doing anything. Well, he already created some turmoil for a few days, so at least it had that effect :P Galí's point is not so much whether Draghi is wrong or right, he just points out that the Eurozone may need truly inflationary policies (which, yes, are inconceivable today in the EU - I would say any measure bringing unemployment to one digit is inconceivable to the EU mindset :P), and that QE is not one of them.
Regarding the fun facts, yes, it's very EU :P But they're not so important: in fact, this is a policy that most central banks in the Eurozone could carry out themselves - if they were actual central banks :P Even if every country ends up doing a QE "on its own" the expected impact would be very similar. The problem is that within a monetary union, no one can decide and carry out these policies on its own, so even if it's Germans buying German debt and Irish buying Irish debt (like QE in the US is the US buying US assets), we need the ECB to decide, announce and implement it. Remember that this is not intended as an unconventional bailout, debt restructuring, or write-off, but as an unconventional monetary expansion (and thus Galí's argument that it will not necessarily -and most likely not- have the desired impact on aggregate demand).
Regarding the fun facts, yes, it's very EU :P But they're not so important: in fact, this is a policy that most central banks in the Eurozone could carry out themselves - if they were actual central banks :P Even if every country ends up doing a QE "on its own" the expected impact would be very similar. The problem is that within a monetary union, no one can decide and carry out these policies on its own, so even if it's Germans buying German debt and Irish buying Irish debt (like QE in the US is the US buying US assets), we need the ECB to decide, announce and implement it. Remember that this is not intended as an unconventional bailout, debt restructuring, or write-off, but as an unconventional monetary expansion (and thus Galí's argument that it will not necessarily -and most likely not- have the desired impact on aggregate demand).
the problem is that europe is not all the same, Piigs and northern countries have different needs.
While piigs could really need a QE and public spending, northern countries could afford the public spending without any "help" in the market and only "enjoining the inflation".
If you look at US for example their federal spendig is used to take from wealtiest states to give to states in need. That keep the union an union and the USA one country.
So if FED make a QE the money "printed" are not proportionally spended in the whole country. Those money go where there is the big need (with a better marginal productivity?).
the fact is that the politics needed by the EU to become a country are those that the current german government see as the devil:
-public spending and investiments (northern countries)
-publict debt growing (piigs)
-salaries increase (northern countries)
-fiscal transfers (from north to south)
The funny part is that there is no choice. If EU is an integration project these is the only path. If not, euro should fall.
I'm betting over the fact that Germans destroyed europe several times, and I bet they'll do it again.
they're not evil.. they're just driven by criminals.
NB It's hard for me to write that down, my poor english make really hard to explain it good..
While piigs could really need a QE and public spending, northern countries could afford the public spending without any "help" in the market and only "enjoining the inflation".
If you look at US for example their federal spendig is used to take from wealtiest states to give to states in need. That keep the union an union and the USA one country.
So if FED make a QE the money "printed" are not proportionally spended in the whole country. Those money go where there is the big need (with a better marginal productivity?).
the fact is that the politics needed by the EU to become a country are those that the current german government see as the devil:
-public spending and investiments (northern countries)
-publict debt growing (piigs)
-salaries increase (northern countries)
-fiscal transfers (from north to south)
The funny part is that there is no choice. If EU is an integration project these is the only path. If not, euro should fall.
I'm betting over the fact that Germans destroyed europe several times, and I bet they'll do it again.
they're not evil.. they're just driven by criminals.
NB It's hard for me to write that down, my poor english make really hard to explain it good..
f you look at US for example their federal spendig is used to take from wealtiest states to give to states in need. That keep the union an union and the USA one country.
So if FED make a QE the money "printed" are not proportionally spended in the whole country. Those money go where there is the big need (with a better marginal productivity?).
That is not true (but I'll gladly look at evidence on the contrary). QE in the US is conducted at the aggregate level, with the Fed buying assets from whoever has them. Money may end up in the hands of the (private) agents with worse balance sheets. Importantly, no money is "printed" (which is what Galí examines, and in which case there would be a "where to spend" decision). Similarly, there is no state-to-state transfer in place in the US as a consequence of the crises. There are just citizen-to-citizen transfers (like inside European countries), which may result in net flows from state to state when you add them up, but those are programs ran by the Federal Government and don't involve the public finances of individual states. The idea of EU controlled taxes and transfer at teh citizen level has been suggested before (a much better way to integrate Europe than "structural funds" and the like), but unfortunately it was very hard to sell in countries that would be net contributors of such schemes today... which not only is a lack of foresight, but also especially surprising since they are accepting huge transfers between governments. I can't begin to explain how much better would it be to have the richest citizens in Europe (German or Greek) transfer money to the poorest (German or Greek), as opposed to the German government (with taxes from all Germans, rich and poor) transfering money to the Greek government (yes, the money will go back to banks, etc, but I guess the point is clear).
But this is not fiscal policy: with the level of integration of EU financial markets, it will matter little where the direct purchase is made (buying Irish bonds from Spanish Santander may result in higher financial investment in the UK or cheaper mortgages in Malta).
And it is not clear that "troubled" countries will have higher returns from public investment (if such program took place - remember QE is not a fiscal expansion). For example, Spain will focus its public investment this year on its already over-sized high-speed train network, with even negative productivity (even if we forget about the cost of building them, all these lines - and 90% of the existing ones- will generate losses as long as they are operative). And maybe there's an investment opportunity in, say, Germany, with positive returns, therefore increasing present and future demand across Europe.
The funny part is that there is no choice. If EU is an integration project these is the only path. If not, euro should fall.
Actually, to become closer to being a country (and I agree: a currency union requires moving in that direction) you need more country-like policies. As in the example I gave above, we need citizen-level policies organized at the European level. Country-level policies, even with differentiated policies for north and south, or with transfers between north and south, will fail, because they keep the discussion in the frame that better suits nationalists and UKIP-style populists, while also keeping all the power in the hands of national governments. National governments are always going to sabotage the movement towards more harmonization, as it will reduce they're own power It's not about the government of Germany vs the government of somewhere else; all governments have the same survival instinct. A closer union can only arise if citizens impose it on their governments.
So if FED make a QE the money "printed" are not proportionally spended in the whole country. Those money go where there is the big need (with a better marginal productivity?).
That is not true (but I'll gladly look at evidence on the contrary). QE in the US is conducted at the aggregate level, with the Fed buying assets from whoever has them. Money may end up in the hands of the (private) agents with worse balance sheets. Importantly, no money is "printed" (which is what Galí examines, and in which case there would be a "where to spend" decision). Similarly, there is no state-to-state transfer in place in the US as a consequence of the crises. There are just citizen-to-citizen transfers (like inside European countries), which may result in net flows from state to state when you add them up, but those are programs ran by the Federal Government and don't involve the public finances of individual states. The idea of EU controlled taxes and transfer at teh citizen level has been suggested before (a much better way to integrate Europe than "structural funds" and the like), but unfortunately it was very hard to sell in countries that would be net contributors of such schemes today... which not only is a lack of foresight, but also especially surprising since they are accepting huge transfers between governments. I can't begin to explain how much better would it be to have the richest citizens in Europe (German or Greek) transfer money to the poorest (German or Greek), as opposed to the German government (with taxes from all Germans, rich and poor) transfering money to the Greek government (yes, the money will go back to banks, etc, but I guess the point is clear).
But this is not fiscal policy: with the level of integration of EU financial markets, it will matter little where the direct purchase is made (buying Irish bonds from Spanish Santander may result in higher financial investment in the UK or cheaper mortgages in Malta).
And it is not clear that "troubled" countries will have higher returns from public investment (if such program took place - remember QE is not a fiscal expansion). For example, Spain will focus its public investment this year on its already over-sized high-speed train network, with even negative productivity (even if we forget about the cost of building them, all these lines - and 90% of the existing ones- will generate losses as long as they are operative). And maybe there's an investment opportunity in, say, Germany, with positive returns, therefore increasing present and future demand across Europe.
The funny part is that there is no choice. If EU is an integration project these is the only path. If not, euro should fall.
Actually, to become closer to being a country (and I agree: a currency union requires moving in that direction) you need more country-like policies. As in the example I gave above, we need citizen-level policies organized at the European level. Country-level policies, even with differentiated policies for north and south, or with transfers between north and south, will fail, because they keep the discussion in the frame that better suits nationalists and UKIP-style populists, while also keeping all the power in the hands of national governments. National governments are always going to sabotage the movement towards more harmonization, as it will reduce they're own power It's not about the government of Germany vs the government of somewhere else; all governments have the same survival instinct. A closer union can only arise if citizens impose it on their governments.
I'm not sure how this is supposed to work. ECB buys the bonds from banks, so banks have more free money to lend companies. The new money available to companies should then be used to invest etc. to stimulate the market. But aren't many big companies already sitting on a bunch of financial reserves? Afaik Apple has billions they don't know where to spend. Also I read that the largest german companies have rising assets due to the crisis. But if noone buys stuff companies won't invest. That problem is not solved?
Wouldn't they be better off if they just gave the money to EU citizens, about a thousand billions for 500 million inhabitants.. yay, more than 2000 € for everyone :p
Wouldn't they be better off if they just gave the money to EU citizens, about a thousand billions for 500 million inhabitants.. yay, more than 2000 € for everyone :p
Yes, you are more or less following the steps of past and not so past economists who have concluded that in this type of contexts there won't be much reaction to QE in terms of demand :P
What you suggest (and has actually happened before, although not at such a big scale - see the US tax rebates of 2001 and 2008, for example) would have a more direct impact, especially if the money goes to liquidity constrained consumers. Of course, those rebates increased the fiscal deficit in those years; in other words, were debt-financed, and if most bond holders are domestic agents, you may neutralize a large part of the effect. But what you seem to suggest is to do it with the printing press this time, which would be closer to Galí's argument ;) And one could even argue that money-financed government expenditure would be even better as you make sure it gets spent in its entirety, but anyway :P
In any case, your main point is shared by many: the transmission channels of monetary policy are broken at the zero lower band (good old liquidity trap), so purely monetary expansions, even through unconventional QE, won't change much. We'll see...
What you suggest (and has actually happened before, although not at such a big scale - see the US tax rebates of 2001 and 2008, for example) would have a more direct impact, especially if the money goes to liquidity constrained consumers. Of course, those rebates increased the fiscal deficit in those years; in other words, were debt-financed, and if most bond holders are domestic agents, you may neutralize a large part of the effect. But what you seem to suggest is to do it with the printing press this time, which would be closer to Galí's argument ;) And one could even argue that money-financed government expenditure would be even better as you make sure it gets spent in its entirety, but anyway :P
In any case, your main point is shared by many: the transmission channels of monetary policy are broken at the zero lower band (good old liquidity trap), so purely monetary expansions, even through unconventional QE, won't change much. We'll see...