Euro Sheds More Post-ECB Gains

The US dollar is mostly little changed against the major currencies. The euro is the main exception. After a halfhearted attempt to push above the $1.3600, the euro has been sold through yesterday’s lows.. With positioning assumed to be more balanced after the gyrations in the second half of last week, there is some pressure to […]

Tinkering on the Margins: ECB Edition

Has the ECB finally ended its hard-money ways? You know the kind that raises interest rates twice during the crisis,allows aggregate demand in the periphery to stall, and fosters below-trend growth in money supply and money velocity. On Thursday, the ECB said it would be taking bold steps to stabilize the economy. It would start charging banks for the privilege […]

ECB’s Negative Deposit Rate: Will It Boost Inflation?

The European Central Bank announced on Thursday that it is moving interest rates into negative territory, charging banks for maintaining deposits with the ECB rather than paying the banks positive interest. The hope is that lower (now even negative) interest rates may provide some stimulus to the European economy which might help bring European inflation closer to the […]

ECB Framework: BEEEP

Next week’s ECB meeting could very well prove to be among the most important events of the year.  It has taken ECB President Draghi’s leadership and increased risk of lowflation if not deflation to forge an apparent consensus at the central bank that more action is needed. While the “when” has been largely agreed upon […]

Some Things to Consider if Spain Leaves the Euro

It might seem almost churlish to wonder what would happen if Spain were to leave the euro. The official European position is that the battle of the euro has been pretty much won, and anyone who argues otherwise will be accused of being a euro hater, an Anglo-Saxon or, even worse, a writer for theFinancial […]

Talking Down Exchange Rates: Japan and China Can’t, but Europe Can?

Many observers and policy makers expressed frustration with Japanese officials in late 2012 and early 2013 for seemingly making the exchange rate an objective of policy and explicitly talking the yen down. European and US officials insisted in February 2013 that Japan pledge to use monetary policy for domestic purposes and not target foreign exchange rates. […]

Doing Business with Putin’s Russia: Why it’s Dangerous to Trade with People who don’t Believe in Trade

I spent the 1990s teaching economics at a business school in Moscow. Our students were graduates of FizTech, Mekh-Mat, MIFI—the whole alphabet soup of science and technology schools that had fed the Soviet military-industrial establishment. These young men and women had degrees in things like “laser weapons platform design” that weren’t in much demand in […]

Draghi Says Nothing New; Status Quo Persists at ECB

The ECB shrugged off called from the OECD and the IMF to ease policy. Nor did the ECB make technical moves, like reducing the rate corridor by cutting the 75 bp lending rate. By arguing that inflation expectations are firmly anchored, Draghi seems to have initially dampened speculation of more dramatic action next month. It does […]

Japan May Strike Trade Deal With Europe Before the U.S.

Some US officials have suggested that if Japan does not cede to US demands that it should be dropped from the Trans-Pacific Partnership negotiations. This might be a rhetorical zeal and part of the negotiating process. If it is genuine, it is a risky course and could be a self-defeating exercise. Prime Minister Abe did not appear […]