ECB Report 2015Q2 – ECB Rates, Balance Sheet, QE & Tgt2 Balances Amid Greek Crisis

For reasons discussed previously, this post presents and briefly discusses a number of variables pertaining to the activity of the ECB from its inception until now. Particular focus is put on the more recent events of the last quarter and a brief comparison is made with the state of affairs when last I considered any of these variables.

The post is divided in 4 parts:

  • First, I consider the ECB’s most orthodox policy tools, the policy rates.
  • Secondly, I review the structure of the ECB’s balance sheet.
  • This is then followed by a more indepth consideration of the elements pertaining to different forms of direct financial market intervention,
  • Lastly, I provide a brief review of the recent developments in Target2 balances.

Following these considerations, I conclude that

  • The negative deposit rates introduced recently are probably not triggering the flow of cash onto the economy that was desired.
  • Today, the main driver of the balance sheet on the asset side are the government bonds purchased to relief financial pressure, which replaced the long-term borrowing.
  • The ELA provided to Greece is quite visible on the assets of the ECB.
  • The main liability counterpart to these bond purchases are cash created, bank deposits and revaluation. This means that the ECB is creating money that is not finding its way into the real economy. So inflation fears seem misplaced.
  • There is still a lot of scope for ECB intervention in troubled countries. Greece is altogether absent from the PSPP. Portugal represents a very small fraction of the PSPP. The OMT as not been triggered.
  • The election of the present Greek government had a clear effect on Target2 balances, but one that is not particularly large overall.

It is my opinion that within the scope of what it can do, the ECB is already doing plenty. It sure can do more and with a clear mandate it could and would do so. But the mandate is necessary and getting it will take a very big crisis.

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ECB reports

If you are a regular reader of this website, you’ll know I have been struggling to juggle all the tasks I have given myself. As a result, this website and its maintenance has suffered. I have made many promises (mainly to myself…) about keeping up with events and writing about this and that, which I have miserably failed to fulfil. As a result, I’ve fallen a little bit behind events and the relevance of this website may have suffered. That is unfortunate and it has forced me to think of ways that I can deal with this problem, keeping in mind that I will continue to juggle at least another two jobs and one PhD.

Efficiency seems to be the name of the game… so here’s the compromise I have found: Quarterly reports.

To begin with there will only be one about monetary developments in the Euro-Zone, namely about the ECB’s balance sheet and its financial intervention. If this works, I would hope to build and add other variables, such as ECB rates, interbank market rates and reserves. I’ll archive these in the appropriate ECB Watch pages of the European Political Economy Network of this website.

I am making no promises, but my hope is to be able to publish one such ECB-centered post/report on the last Friday of every quarter (so for 2015Q2 on 26/06/2015). Let’s see if anything comes of it… Fingers crossed!

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American & Russian pressures build momentum towards a European army

Every-so-often, discussions emerge regarding the need of establishing a European army. This is an idea as old as post-WWII European integration and the European Defence Community proposed in 1952 that died with the 1954 veto of the European Political Community. Beyond the Common Security and Defence Policy and the Common Foreign and Defence Policy, military integration is a popular notion in France as well as among its traditional European allies, including Spain, Italy and Greece, who are unfortunately afflicted by austerity. The Baltic states and eastern Europe are traditionally much more vocal in support of a European army as a means of final protection against the projection of Russian foreign policy and the historical threat of Invasion. I am under the impression that Germany, however, has been much more reticent, if I am not mistaken, always taking a back stance vis-a-vis the discussion, fearful of the memory of its militaristic history. The UK on the other hand has been one of the leading obstacles to the formation of a EU army.

For my part I have spoken about why I am in favour of this before:

  • It is the only way to have a defence force that can actually defend the EU,
  • It takes advantage economies of scale
  • It takes advantage of military returns to scale
  • It would create a single military purchasor, a monopsonist akin to the US DoD that would be able to channel the necessary funds towards the type of cutting edge R&D that has given us GPS, drones, exoskeletons, computers, missiles, the internet, etc.

Of course, I am not naive. Any step to this effect would create an enormous potential for evil and destruction. While politically it may be an advantage, I tend to be suspicious of any policy that may appeal to rightwing extremists even if only as a means to redirecting their attention. Militarism has a very bad history in Europe and we should be very wary of it.

Nevertheless, this week may be the beginning of a new phase, with what appears to be a coordinated PR move from Brussels and Germany towards further European Integration. This post quickly reviews all the events and some related reports, asks 2 questions:

  • Is this renewed interest in European military integration meaningful or a front?
  • What triggered this announcement? – A Russian invasion of the Ukraine or the interference of US neo-cons?

It then reviews the latest proposal for EU defence integration and upcoming events and concludes that this is indeed likely to bring about some progress in this policy front.

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Military, Civil Administration, Taxes, Politics and Economics of the Roman Republic and Empire

The evolution of the Roman republic and later of the Roman empire is interesting because of the interplay between social, military and poltical dimensions as the drivers of change. To that extent, this post is probably best understood in the context of the other two on the rise and fall of the Roman republic and on the fall of the Roman empire. To that effect, it recaps the political and economic insights described in those two posts and adds some further facts I stumble across while reading about Roman antiquity.
The post is divided in 5 sections that discuss the main issues I was interested in:

  • The military structure of Rome
  • The Civil Administration
  • Taxation
  • Political Stability
  • Economic structure

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Sources for the Roman Empire

While writing the recent posts on the rise and fall of the Roman Empire I made use of a vast array of sources that I believe I should list below for my own sake and for that of others potentially interested in following a similar line of inquiry. The sources are divided in 2 categories: Primary sources and Secondary Sources (articles and books). I have added some general comments on my opinion of each source and some of the uses I made of them.

Primary Sources

Secondary Sources – Articles

Secondary Sources -Books

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Holocaust Memorial Day – Never Forget

On this day 70 years ago, Soviet troops liberated the Auschwitz-Birkenau concentration camps in present-day Poland. The scale of death and human destruction they found there was not lost to these men, even though they had been fighting on the most violent front of the most violent war in the history of mankind for 3 years.

Today we remember and hope it may never happens again.

Some sources of testimonials from survivors and related articles:

I also personally recommend the following:

Kristallnacht 08-09.11.1938

File:Ebensee concentration camp prisoners 1945.jpg

File:Buchenwald Corpses 07511.jpg

… and yet we know if continued to happen elsewhere, such as Rwanda and Cambodia.

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A New Phase in Euro-Zone Crisis – Zero Coupon Perpetuities for Greece?

I don’t have an enormous amount of time to consider the implications of the Greek election yesterday in a tremendous amount of detail. So the following are my thoughts, disorganised and potentially incoherent.

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