Tag Archives:

Eurozone

Poor old ECB. Damned if it does, damned if it doesn’t.

The votes are in and it’s pretty unanimous. Despite Mario Draghi’s best efforts to persuade otherwise, the market is clear that today’s announcements are tantamount to tapering. Frankly anything less than an extension of Euro 80bn per month, irrespective of the duration, was likely to have been taken as such, with scant evidence of the inflation target being achieved during the forecast horizon…

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10 years of the M&G Bond Vigilantes blog. A new book and fundraising for Cancer Research UK.

Today is the 10th anniversary of the Bond Vigilantes blog.  Here’s a look back at the incredible changes to bond markets and monetary policy that we’ve been through over that decade.  Also today we are launching our new book (the difficult second album) in support of Cancer Research UK.  There’s a link to our Just Giving page at the bottom if you like what we do and can spare a few quid.

My fi…

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Four years of the ECB doing “whatever it takes”

Transport yourself back to July 26, 2012. Borrowing costs for the “peripheral” European nations are uncomfortably high. Ireland, Portugal and Greece were in the process of applying for bailouts, while the Spanish banking system was dangerously close to falling over. It wasn’t a question of when an EU member would leave the single currency bloc, but who? Step forward ECB President Mario Draghi, …

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A Germanic problem

I attended a conference last week where European Central Bank (ECB) bashing was approaching fever pitch. The crux of the argument goes a little something like this:

“The ECB have lost the plot. Monetary policy has become impotent. The ECB is at the lower bound and the law of diminishing returns results only in an ever greater misallocation of resources, punishing savers and rewarding speculatio…

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Negative Rate World (NRW) – a wiki of unintended consequences

The world has seen negative interest rates before – Switzerland set interest rates below zero for foreigners in the 1970s in order to slow flows into the Franc.  But today’s negative rate environment is far more widespread, with Switzerland, Denmark, Sweden, Japan, and the Eurozone all setting negative policy rates.  Lots has been written about the intended transmission mechanisms of negative r…

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The Euro, confidence and consumption will drive European GDP

It has been difficult to filter through the noise of the Greece situation these past few months. But when you stop and have a look at the economic backdrop, things don’t look as bad as some of the alarming headlines might have you believe. Some significant economic headwinds have turned into tailwinds, which will likely drive European growth for the next 18 months.

1. The Euro

In April, the Eu…

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Greece, the currency vigilantes and the Expulso solution

It has been a while since we have discussed the economics of the single currency, but once again the issue of its suitability for all its members is at the forefront of economic concerns, as Greece faces some difficult decisions.

The financial crisis has taught us a number of lessons: fiscal policy works, monetary policy works, better regulation is beneficial for the financial sector, confidenc…

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UK politics: “The most difficult election to call in the post war period”

As the old adage goes, markets don’t like uncertainty. And yet in just under two months we have a UK election, about which the only degree of confidence that anybody has is that the UK will have a second successive hung parliament – the key question is whether the UK ends up hung to the left, or to the right, or we get a potentially painful outcome somewhere in between.

So we thought it worthwh…

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Demurrage – a tale of gold, cash and mercenaries

Historically I’ve struggled with the concept of gold as an investment. Presumably if you bought gold for this purpose you would want to store it somewhere safe and insure it. However, investors in gold should account for the fact that there is a cost to sleeping well at night. Vaults and insurance don’t come for free, and that cost can be thought of as a negative yield or the demurrage of gold….

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Bad loans in banks to be regulated by ECB total €879 billion

Happy Halloween. It’s time for some scary charts.

Halloween is around the corner and that can only mean one thing… scary chart time. Every year around this time, we highlight economic variables and statistics that could give central bankers nightmares. If stuff like non-performing loans, bad forecasts and big numbers scare you then it is probably time to turn off your computer screen and forget you ever saw this blog. The following is not for …

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