Sunday, June 17, 2012

Is the ECB’s Target2 critical for the euro’s future? A debate between Felix Salmon and Marshall Auerback

Following Marshall Auerback’s guest post on the problem with Target2, and how it can potentially lead the German Constitutional Court to throw a spanner in the works of the euro system, Felix Salmon published an interesting article arguing that all this fuss about Target2 is the result of a misunderstanding of what Central Banks do – and of the profound difference between a liability of a Central Bank and that of a private bank. Felix’s point is well taken. But Marshall Auerback is not unaware of these important differences. In this post, he replies to Felix.
Read it at Yanis Varoufakis
Is the ECB’s Target2 critical for the euro’s future? A debate between Felix Salmon and Marshall Auerback
by Yanis Varoufakis

UPDATE

Ramanan points out in the comments that Felix Salmon has responded to Marshall.

Read it at Reuters | Opinion
Don’t fear Target2. Fear its opponents.
by Felix Salmon

18 comments:

Ramanan said...

New post by Salmon:

http://blogs.reuters.com/felix-salmon/2012/06/15/dont-fear-target2-fear-its-opponents/

Matt Franko said...

Looks like the mattress is another option (at least for mom & pop):

"Banks take extra care to keep ATMs full of cash"

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_16/06/2012_447336

Matt Franko said...

This from the article which may support Marshall's pov:

"while it has become particularly difficult to open an account abroad: Besides the usual bureaucratic obstacles, the time of response by foreign banks has grown considerably when it comes to new accounts."

Matt Franko said...

"World Bank chief warns of euro's 'Lehmans moment'"

Maybe 'Minsky Moment' or perhaps 'Moron Moment'...

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_17/06/2012_447450

Tom Hickey said...

Thanks, Ramanan. I updated the post with Salmon's response.

Tom Hickey said...

Matt: ""World Bank chief warns of euro's 'Lehmans moment'"

Maybe 'Minsky Moment' or perhaps 'Moron Moment'..."

I am concerned about a Credit-Anstalt moment. If you aren't clear on the significance of that, have a look at the link.

Being very successful, it [C-A] became the largest bank of Austria-Hungary. It declared bankruptcy on May 11, 1931. It has been said that this event resulted in a global financial crisis and ultimately the bank failures of the Great Depression

Dan Kervick said...

Seems they both agree.

Ben said...

Off topic, but there's an absolute corker of an article here by Niall Ferguson: "Why the Young Should Welcome Austerity": http://www.bbc.co.uk/news/world-18456131#TWEET160751

Enjoy!

Tom Hickey said...

Ferguson: "If young Americans knew what was good for them, they would all be in the Tea Party."

We already knew the man was clueless. This lowers him to moron status.

Matt Franko said...

It goes beyond NF imo Tom.

He fancies himself somewhat of a historian i guess in addition to some sort of economist.

ANYONE in the academe of History, who interprets the history within an assumption of exogenous "money" is also a moron I'm afraid who is training more young people to be morons too.

This part of the academe of history is a disgrace in addition to the academe of orthodox economics... looks like NF has a foot in both moron camps.

This widespread mental phenom just continues to amaze...

rsp

Matt Franko said...

No historians (however some economists do) imo fully appreciate the significance of Lincoln going over to Greenbacks to provision the US during the civil war.... this is "glossed over" imo, or treated as some sort of insignificant historic anomaly, or 'stop-gap measure' by moron mainstream historians who look like they have been brainwashed to think "money" is exogenous...

History in FACT, thru the archeology record for all intents never depicts systems of exogenous "money" as far as I can tell.

rsp

Tom Hickey said...

Right, Matt. NF is a history prof rather than an economist. He is in way over his head.

Niall Ferguson, MA, D.Phil., is Laurence A. Tisch Professor of History at Harvard University. He is also a Senior Fellow at the Hoover Institution, Stanford University, and a Senior Research Fellow at Jesus College, Oxford.

From his cv

Matt Franko said...

Oh this is rich from NF:

"The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn."

HA! ROTFLMAO!

It's not us doing all of the work today.... It's the UNBORN still in the womb! HA! What are they doing in there??? All those expectant moms thought they were just kicking around, but no, NF informs us that they are WORKING in there! HA!

What a moron!!!

This is amazing...

jrbarch said...

It seems Greeks are the abused child - wanting to be beaten even more because that's love; and the only place a meal can come from?

Matt Franko said...

Greek Vote breakdown by age:

18-34 SYRIZA 33%, ND 20%
35-54 SYRIZA 34%, ND 24%
55+ ND 39%, SYRIZA 20%

Anonymous said...

Niall Ferguson believes that any kind of "money printing" by the government is necessarily inflationary. This odd belief leads him to reach his ridiculous conclusions, i.e. that the as yet unborn will pay heavily for our 'debts'.

He has zero understanding of basic monetary economics. The man is an offensive, idiotic joke.

Scott Fullwiler tears NF's stupid ideas to pieces in his paper "interest rates and fiscal sustainability".

Matt Franko said...

"Senior Research Fellow at Jesus College"

Well then maybe this fellow should do some research into how Jesus viewed deficits...

8 "Or what woman having ten drachmas, if she should ever be losing one drachma, is not lighting a lamp and sweeping the house and seeking carefully till she may be finding it?
9 And, finding it, she is calling together the friends and the neighbors, saying 'Rejoice together with me that I found the drachma which I lose!'
10 Thus, I am saying to you, there is coming to be joy in the sight of the messengers of God over one sinner repenting." Luke 15

Where did this house frau get the ability to save these 10 drachmas if the govt that issued the drachmas wasn't running a deficit?

Why didn't the Lord, instead of using this process whereby a woman of the house would seek to save state currency as a supportive analogy, take this opportunity to scold the drachma issuing monetary authority for running a deficit?

NF apparently thinks that even Jesus thought "money" was exogenous, which means NF thinks Jesus is a moron, hence it is NF that then becomes the real moron.

Too bad for NF, thankfully we are not morons.

Chewitup said...

I enjoyed NF's latest book "Civilization" and his killer apps theme until he screwed it up in the last chapter with his economics prescription. But we must forgive him as he comes from Harvard and doesn't know any better.