Which lender of last resort for the eurosystem?

The paper want to demonstrate how to organise central banking in a monetary union of independent nations, with emphasis on the role of the central bank as lender of last resort. Section I presents the first proposal for a decentralised central banking system in a monetary union by the Swedish economist Erik Lindahl in 1930, as well as that in 1989 for the Eurosystem, the centrepiece of European Monetary Union (EMU), by Carlo Ciampi, then President of the Banca d’Italia. Both proposals emphasised the necessity of a strong and powerful central monetary authority. Section II demonstrates that EMU lacks a central monetary institution, because the European Central Bank (ECB) is neither a bank of issue nor can it act as a lender of last resort. Section III discusses how to overcome this fundamental deficiency of the Eurosystem, arguing that the missing central fiscal authority in EMU is as much an Achilles heel as the “narrow” ECB. --

The endogeneity of money and the eurosystem

The endogenous theory of money, developed by Basil Moore, argues that the supply of central bank money in modern economies is not under the control of the central bank. According to this view, a central bank typically supplies cash reserves automatically on demand at its minimum lending rate, resulting in a clearly horizontal money supply function. While the paper agrees with Moore that the supply of central bank money cannot be determined exogenously by the central bank, it wonders whether the supply is determined completely by the demand of the commercial banks. The paper suggests that the central bank has some exogenous power to control the quantity of its supply by rationing. More importantly, the central bank is forced to do so! The central bank cannot not merely exist as an automat responding to the wishes of the commercial banks. Part I discusses the cause why the central bank has to restrict its supply, while part II demonstrates how the supply of central bank money can be controlled by looking at the monetary policy operations of the Eurosystem. In accordance with this analysis, the paper offers a modified horizontal or “staircase” supply function of central bank money. --

The European Central Bank and the eurosystem: An analysis of the missing central monetary institution in European Monetary Union

The Eurosystem is the fifth decentralized system in the history of central banks. It consists of the European Central Bank (ECB) and twelve National Central Banks (NCBs) forming the European Monetary Union (EMU). The stark decentrality of this System is so little known that ubiquitous statements by high level Euro experts on its supposed similarity with other decentralized systems, like the former Bundesbank System and the existing Federal Reserve System, are met with no protest. A closer look on European documents and the balance sheet of the ECB reveals, however, that the ECB – far from being the monopoly supplier of central bank money – cannot set the refinancing conditions to credit institutions in EMU. The latter are determined by the Council of Governors of the Eurosystem, while the main refinancing operations are executed by the NCBs leaving to the ECB the role of vicarious agent. The ECB can neither control all types of securities accepted for the NCBs’ credit operations nor is it able to act as lender of last resort. Yet, every possible manoeuvre to make the ECB look like a central bank of the NCBs is relentlessly employed, most obviously in the design of the Euro banknotes which are issued by the NCBs but carry only the imprint of the ECB, as well as by the ECB’s balance sheet as at 31 December 2002. The latter contains for the first time the item “banknotes in circulation” that are, however, issued by the NCBs and only allocated to the ECB. --

Deutschlands Wirtschaft, seine Schulden und die Unzulänglichkeiten der einheitlichen Geldpolitik im Eurosystem

-- In 2004, Germany became Europe’s ‘king of debt’ in absolute figures, thereby leaving behind even Italy, for decades the bearer of this awkward title. However, Germany’s rising public debt is not due to loose fiscal policy but the result of the common monetary policy in European Monetary Union (EMU). While Germany has the lowest rate of inflation in EMU, it has to pay the same nominal rate of interest as its competitors, that is, it has to shoulder the by far highest real rate of interest. This in turn has led to economic stagnation, with decreasing tax revenues and, in spite of huge efforts to reduce public expenditures, rising debts. As Germany is still the biggest economy in Europe, its stagnation has decisively contributed to EMU’s slow economic growth. According to the authors, the not so pleasant state of Euroland is due to the fact that EMU is not an ‘optimal currency area’ (Robert Mundell). EMU does not fulfil one of the most important criteria for optimality: the absence of tremendous differences between its member countries’ real rates of interest. In the paper, several measures of how to overcome the German problem are discussed, especially how to reconstruct the Eurosystem, the decentralised central banking system of EMU, to allow for a differentiated monetary policy, with high (low) nominal rates of interest for high (low) inflation countries. Drawing on a proposal by Erik Lindahl in 1930, this would mean to re-establish the European Central Bank (ECB) as the central monetary authority in the Eurosystem, with the monopoly to issue money. In spite of its name, the ECB is not a bank of issue, not to speak of being a lender of last resort, but only a co-ordinating agent between the Council of Governors of the Eurosystem, the decisive institution for monetary policy in EMU, and the twelve national central banks who alone issue the Euro. An alternative proposal discussed is to assign to the strongest central bank in the Eurosystem, the Bundesbank, the role of the Federal Reserve Bank of New York in the Federal Reserve System, thereby transforming the Eurosystem into a European Reserve System of Federal States. However, the strengthening of the ECB, or the Bundesbank, needs the support of a central fiscal authority in EMU, a role which today’s EG Commission in Brussels cannot shoulder : it disposes only of a tiny amount of EMU’s aggregate tax revenues. The authors are aware of the political difficulties to re-organise the Eurosystem. However, if politicians shy away from such a reform, the only option for solving Germany’s stagnation should be to leave EMU.

Wie mächtig wird die Europäische Zentralbank?

In der Öffentlichkeit herrscht der Eindruck, daß die Europäische Zentralbank eine ähnlich unabhängige Institution wie die Deutsche Bundesbank sein wird. Wie steht es tatsächlich um die geldpolitischen Kompetenzen der Europäischen Zentralbank? Wie mächtig wird sie im Vergleich zu den nationalen Zentralbanken der Mitgliedsländer der EWU sein? --

Europas 'Schuldenkönig' und sein Realzins

Deutschland verzeichnet mittlerweile absolut gerechnet die höchste Staatsschuld innerhalb der EU und hat damit das ehemalige Weichwährungsland Italien überholt. Gleichzeitig hat Deutschland die höchsten Realzinsen zu verzeichnen. Welche Rolle spielt bei dieser Entwicklung die Europäische Währungsunion? Sollte das Eurosystem geändert werden? Ist eine Reform durchzusetzen? --

Der Staat als 'Lender of Last Resort' - oder: Die Achillesferse des Eurosystems

The renewed interest in the theory of the lender of last resort (LOLR) as well as the missing LOLR in the Eurosystem has triggered a new thesis on the LOLR: not the central bank but the Minister of Finance is the true LOLR. The classical theorists of central banking – Steuart, Thornton, Bagehot and Hawtrey – understood, although with some shortcomings, what is overlooked in modern discourses on the LOLR: there are restrictions for the activities of the central bank. While the central bank can create high-powered money for emergency loans without limit, its capacity to absorb losses is limited by the size of its capital. Therefore, it has to rely on the strength of another institution: the taxing power of the Government. In the Eurosystem the problem of the missing LOLR is twofold: (i) the European Central Bank (ECB) cannot be turned into a LOLR because it is, unlike the national central banks, not a bank of issue and (ii) the central EU government is weak, with strictly limited taxing powers. Therefore, to prevent financial crises in the Eurosystem not only central bank and tax money solutions have to be considered but also how to use private money and money from international institutions. --

Possible causes of data model discrepancy in the temperature history of the last Millennium

Model simulations and proxy-based reconstructions are the main tools for quantifying pre-instrumental climate variations. For some metrics such as Northern Hemisphere mean temperatures, there is remarkable agreement between models and reconstructions. For other diagnostics, such as the regional response to volcanic eruptions, or hemispheric temperature differences, substantial disagreements between data and models have been reported. Here, we assess the potential sources of these discrepancies by comparing 1000-year hemispheric temperature reconstructions based on real-world paleoclimate proxies with climate-model-based pseudoproxies. These pseudoproxy experiments (PPE) indicate that noise inherent in proxy records and the unequal spatial distribution of proxy data are the key factors in explaining the data-model differences. For example, lower inter-hemispheric correlations in reconstructions can be fully accounted for by these factors in the PPE. Noise and data sampling also partly explain the reduced amplitude of the response to external forcing in reconstructions compared to models. For other metrics, such as inter-hemispheric differences, some, although reduced, discrepancy remains. Our results suggest that improving proxy data quality and spatial coverage is the key factor to increase the quality of future climate reconstructions, while the total number of proxy records and reconstruction methodology play a smaller role

Wahrheit – Geschwindigkeit – Pluralität

Neue Techniken zur Informationsübermittlung befördern den Informationsaustausch. Das ist eine für das 20. und 21. Jahrhundert ganz selbstverständliche Feststellung. Genauso selbstverständlich gilt sie aber auch für das 16. Jahrhundert und die Frühe Neuzeit insgesamt. Ein allseits bekanntes Beispiel dafür ist die Verbesserung der Techniken des Buchdrucks durch die Verwendung beweglicher Lettern. Dies führte dazu, dass neue Medien entstanden und sich dauerhaft etablierten, wie z.B. die Flugschrift und die „Neue Zeitung“. Andere bereits bekannte Genera wie Lieder und Predigten erhielten durch die veränderte Kommunikationssituation eine neue Bedeutung in den Auseinandersetzungen der Zeit. Daraus ergaben sich vielfältige Chancen und Heraus­forderungen, denn die Nutzung dieser neuen Medien wie die Transformation bestehender Medienformate und deren flächendeckende Verwendung setzte politische, soziale, juristische und religiöse Veränderungsprozesse in Gang bzw. beförderte sie.Die Beiträge des Sammelbandes möchten diese neuen Kommunikationsformen und -methoden ebenso wie die Veränderungsprozesse für das 16. Jahrhundert ausleuchten. Dies geschieht, indem Wandlungs- und Transformationsprozesse durch die Nutzung bekannter sowie die Schaffung neuer Medienformate, der Umgang mit Meinungsvielfalt und der damit einhergehenden Pluralität an Deutungen des Zeitgeschehens sowie die Entstehung einer neuen Streitkultur und neue Ordnungsversuche analysiert werden

Multiple dimensions of health locus of control in a representative population sample: ordinal factor analysis and cross-validation of an existing three and a new four factor model

<p>Abstract</p> <p>Background</p> <p>Based on the general approach of locus of control, health locus of control (HLOC) concerns control-beliefs due to illness, sickness and health. HLOC research results provide an improved understanding of health related behaviour and patients' compliance in medical care. HLOC research distinguishes between beliefs due to Internality, Externality powerful Others (POs) and Externality Chance. However, evidences for differentiating the POs dimension were found. Previous factor analyses used selected and predominantly clinical samples, while non-clinical studies are rare. The present study is the first analysis of the HLOC structure based on a large representative general population sample providing important information for non-clinical research and public health care.</p> <p>Methods</p> <p>The standardised German questionnaire which assesses HLOC was used in a representative adult general population sample for a region in Northern Germany (N = 4,075). Data analyses used ordinal factor analyses in LISREL and Mplus. Alternative theory-driven models with one to four latent variables were compared using confirmatory factor analysis. Fit indices, chi-square difference tests, residuals and factor loadings were considered for model comparison. Exploratory factor analysis was used for further model development. Results were cross-validated splitting the total sample randomly and using the cross-validation index.</p> <p>Results</p> <p>A model with four latent variables (Internality, Formal Help, Informal Help and Chance) best represented the HLOC construct (three-dimensional model: normed chi-square = 9.55; RMSEA = 0.066; CFI = 0.931; SRMR = 0.075; four-dimensional model: normed chi-square = 8.65; RMSEA = 0.062; CFI = 0.940; SRMR = 0.071; chi-square difference test: p < 0.001). After excluding one item, the superiority of the four- over the three-dimensional HLOC construct became very obvious (three-dimensional model: normed chi-square = 7.74; RMSEA = 0.059; CFI = 0.950; SRMR = 0.079; four-dimensional model: normed chi-square = 5.75; RMSEA = 0.049; CFI = 0.965; SRMR = 0.065; chi-square difference test: p < 0.001). Results were confirmed by cross-validation. Results based on our large community sample indicated that western general populations separate health-related control-beliefs concerning formal and informal assistance.</p> <p>Conclusions</p> <p>Future non-clinical HLOC studies in western cultures should consider four dimensions of HLOC: Internality, Formal Help, Informal Help and Chance. However, the standardised German instrument needs modification. Therefore, confirmation of our results may be useful. Future research should compare HLOC structure between clinical and non-clinical samples as well as cross-culturally.</p