THE FEDERAL RESERVE AND EUROSYSTEM´S BALANCE SHEET POLICIES DURING THE FINANCIAL CRISIS: A COMPARATIVE ANALYSIS

The balance sheet developments of the Federal Reserve System have received increased attention during recent events. The Fed has expanded its balance sheet and also changed its composition in order to support the financial system. As a consequence the average quality of the assets have, on average, deteriorated. In a similar way, the ECB has recently implemented novel balance sheet policies. In this article we compare the balance sheet policies of these two central banks. We assess the differences in policy strategies and deduct consequences concerning the quality of the respective currencies, as well as future directions of monetary policy.Central Bank Balance Sheets, Quality of Money, Balance Sheet Analysis, Monetary Policy, Subprime Crisis

Ethics and Monetary Theory: Is There a Common Middle Ground?

The current bust has brought a boom to at least one area: the subject of business ethics. While ethics in the general business realm is hotly debated, the monetary sphere is woefully neglected. Jörg Guido Hülsmann’s (2009) The Ethics of Money Production has revived interest in applying an ethical foundation to monetary theory – specifically, bouts of inflation. Given that Central Banks – those institutions entrusted with the control and issuance of a country’s currency – regularly “earn” profits far in excess of what conventional deposit banks report, an ethical assessment is in order. Pushing economics back to its original position as a “moral science” is a welcome move. Monetary economics may be the area most in need of this shift, and will yield the greatest advancements when it is finally achieved

Computing automorphism groups and isomorphism testing in finite groups

We outline a new method for computing automorphism groups and performing isomorphism testing for soluble groups. We derive procedures for computing polycyclic presentations for soluble automorphism groups, allowing for much more efficient calculations. Finally, we demonstrate how these methods can be extended to tackle some non-soluble groups. Performance statistics are included for an implementation of these algorithms in the MAGMA [BCP97] language

Assessing housing quality and its impact on health, safety and sustainability

Background The adverse health and environmental effects of poor housing quality are well established. A central requirement for evidence-based policies and programmes to improve housing standards is a valid, reliable and practical way of measuring housing quality that is supported by policy agencies, the housing sector, researchers and the public. Methods This paper provides guidance on the development of housing quality-assessment tools that link practical measures of housing conditions to their effects on health, safety and sustainability, with particular reference to tools developed in New Zealand and England. Results The authors describe how information on housing quality can support individuals, agencies and the private sector to make worthwhile improvements to the health, safety and sustainability of housing. The information gathered and the resultant tools developed should be guided by the multiple purposes and end users of this information. Other important issues outlined include deciding on the scope, detailed content, practical administration issues and how the information will be analysed and summarised for its intended end users. There are likely to be considerable benefits from increased international collaboration and standardisation of approaches to measuring housing hazards. At the same time, these assessment approaches need to consider local factors such as climate, geography, culture, predominating building practices, important housing-related health issues and existing building codes. Conclusions An effective housing quality-assessment tool has a central role in supporting improvements to housing. The issues discussed in this paper are designed to motivate and assist the development of such tools

The Icelandic and Irish Banking Crises: Alternative Paths to a Credit-Induced Collapse

Iceland’s and Ireland’s banking crises since 2008 provide good examples of credit-induced collapses. While traditional Austrian Business Cycle Theory emphasizes central bank induced low interest rates as the origin of crisis, this paper focuses on two different instigators using the Icelandic and Irish collapses as narratives. First, the artificial reduction in risk through Iceland’s comprehensive deposit insurance plan fueled the króna carry trade throughout the early 2000s, helping to spur a debt-based expansion. Second, the reduction in risk upon accession to the Eurozone increased foreigners’ willingness to invest in Ireland. Higher Irish inflation rates until normalization with core European countries also created higher risk-adjusted returns for foreigners to invest in Ireland. These two factors compounded the lax monetary policies of the central banks of Iceland and Europe and elevated the propensities to take on risk and debt in both countries, thus instigating Austrian-type business cycles

The Rise and Fall of the Icelandic Economy

Iceland became the first developed country in 30 years to request help from the IMF in 2009. While the depths of its recent recession are well studied, the causes of its origin are still misunderstood. This paper looks at two factors: (1) the blanket guarantees provided to the Icelandic banking system by various public agencies, and which fostered an environment of excessive risk taking; (2) a faulty inflation-targeting framework by the Central Bank of Iceland, which resulted in a credit binge engulfing the small island. While the first factor explains why Iceland´s banking sector grew as large as it did, the second accounts for the magnitude of the imbalances in both the real and financial sectors

Knowledge Flows and Insider Trading

Much insider trading literature focuses on the redistribution of monetary rents. This focus has led to ambiguous and conflicting results, unable to identify who the clear winners and losers of insider trading legislation are. Lacking any clearly defined beneficiary, an analysis of the origins and continued support of such legislation is lacking. This paper rectifies this omission by reassessing the involved agents not in light of their relationship to a company, but from all roles of the knowledge transmission process: creator, distributor and user. Information distributors – large news companies and investment houses – are argued to be sufficiently well organized to lobby for maintained and strengthened legislation to protect rents that would otherwise be greatly diminished

The Icelandic and Irish Banking Crises: Alternative Paths to a Credit-Induced Collapse

Iceland’s and Ireland’s banking crises since 2008 provide good examples of credit-induced collapses. While traditional Austrian Business Cycle Theory emphasizes central bank induced low interest rates as the origin of crisis, this paper focuses on two different instigators using the Icelandic and Irish collapses as narratives. First, the artificial reduction in risk through Iceland’s comprehensive deposit insurance plan fueled the króna carry trade throughout the early 2000s, helping to spur a debt-based expansion. Second, the reduction in risk upon accession to the Eurozone increased foreigners’ willingness to invest in Ireland. Higher Irish inflation rates until normalization with core European countries also created higher risk-adjusted returns for foreigners to invest in Ireland. These two factors compounded the lax monetary policies of the central banks of Iceland and Europe and elevated the propensities to take on risk and debt in both countries, thus instigating Austrian-type business cycles

The Interest Rate and the Length of Production: A Comment

Machaj (2015) does a great service in pointing out a key assumption, heretofore unaddressed, in Filleule (2007) and Hülsmann (2010). Machaj errs, however, in stating that who saves will have an ambiguous effect on the interest rate and that where savings are directed can have ambiguous effects on the length of production. In this brief comment I will first show that who saves will have no effect on the interest rate. I then turn my attention to what it means to “lengthen” the structure of production. Although extended production time or additional “stages” of production make convenient placeholders for increased roundaboutness, they fail to grasp the core concept as it pertains to capital theory – what is it about production processes that makes more or better consumer goods

The Rise and Fall of the Icelandic Economy

Iceland became the first developed country in 30 years to request help from the IMF in 2009. While the depths of its recent recession are well studied, the causes of its origin are still misunderstood. This paper looks at two factors: (1) the blanket guarantees provided to the Icelandic banking system by various public agencies, and which fostered an environment of excessive risk taking; (2) a faulty inflation-targeting framework by the Central Bank of Iceland, which resulted in a credit binge engulfing the small island. While the first factor explains why Iceland´s banking sector grew as large as it did, the second accounts for the magnitude of the imbalances in both the real and financial sectors