Central Banks Policy Asynchronous-ity – A Source of New Risk

Since 2009, the key driver of financial markets has been low rates and abundant liquidity which has boosted all asset prices. The total amount of money pumped into global money markets is around US$10-12 trillion, enough to buy each person on earth a widescreen flat TV.  In the great reflation, according to one estimate, over […]

The Internationalisation of the Renminbi

According to Dan Steinbock, the internationalisation of the renminbi is accelerating. The inclusion of the yuan in the IMF basket of reserves is now a matter of time. On August 11, the People’s Bank of China (PBOC) adjusted the exchange-rate of the Chinese renminbi (RMB) against the US dollar to better reflect market conditions. The net […]

Is Banks’ Home Bias Good or Bad for Public Debt Sustainability?

Introduction and literature Issues related to the entrenched sovereign-bank nexus, particularly home bias—banks’ holdings of sovereign domestic debt—have gained prominence during the Global Crisis in recent years as public debt was rising especially in the European periphery.1Prompted by foreign investors’ flight as well as cheap Long-Term Refinancing Operations (LTRO) funding from the ECB, many peripheral […]

The Growth of Shadow Banking

By Gaston Gelos and Nico Valckx: Shadow banking has grown by leaps and bounds around the world in the last decade.  It is now worth over $70 trillion. We take a closer look at what has driven this growth to help countries figure out what policies to use to minimize the risks involved. In our analysis, we’ve found […]

Larry Summers’ Contradictory and Dishonest Defense of Administration’s Bank-Focused Crisis Response

If you are going to succeed in rewriting history, a necessary condition is that the public doesn’t remember it very well. Unfortunately, that requirement is not in place for the architects of the Administration’s blatantly bank-friendly crisis responses. Timothy Geithner’s book Stress Test, in which he tries selling the idea that rescuing the banks was […]

Banking on the Government

By Jesus Gonzalez-Garcia and Francesco Grigoli: (Version in Español) Government ownership of banks is still common around the world, despite the large number of privatizations that took place over the past four decades as governments reduced their role in the economy. On average, state-owned banks hold 21 percent of the assets of the banking system worldwide. In Latin American […]

Is Credit Suisse Really in Jail?

Credit Suisse’s guilty plea to a charge of tax fraud seems to be a major step forward for a Justice Department that was satisfied both before and after the financial crisis with toothless deferred prosecution agreements and large-sounding fines that were easily absorbed as a cost of doing business. A criminal conviction certainly sounds good, and I […]

China: Market Mechanisms Need Official Help

Last July, the People’s Bank of China removed controls on the lending rate and began liberalizing savings rates. This aggravated the volatility of money market rates. It is becoming clearer to PBOC officials that even the successful functioning or market mechanism require an important official role. PBOC Governor Zhou told a conference in Beijing last […]