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the @FinancialTimes interview with Klaus Regling,
shows quite well the difference between fiscal powers and the austerity contraption that is the ESM. ft.com/content/865ced…
“One cannot create bonds out of nothing” - says a high-ranked European official at the historical moment when every large government in the word is doing precisely that, some in trillions. Yes we can!
if you are a multilateral institution - like ESM, IMF, World Bank, EIB - you cannot create bonds out of nothing. But that is precisely what the euro does not need.

when we talk about fiscal union, we dont talk about complex institutional layerings.
what about a Dutch solution: concentrate fiscal authority over tax haven practices at European level.
Tax multinationals at uniform levels (bye-bye special arrangements). Use tax revenues to pay for coronabonds.

voxeu.org/article/corona…
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Daniela Gabor
@DanielaGabor
in my @FTAlphaville post, I followed the IMF in assuming that central bank swaps come with fx-related margin calls.
It turns out I was wrong: the Fed does not call margin on its peers when, throughout the life of the swap, the actual rate moves away from agreed exchange rate.
this matters because the new FIMA repo facility creates a two-tier hierarchy of central banks:
1. Swap$ central banks, Fed treats as peers
2. Repo$ central banks, Fed treats as private commercial banks, who can borrow against their Treasuries
the second tier - South Africa for instance - is limited in its access to USD by their portfolio of Treasuries, and by margin calls the Fed will make if those Treasuries fall in price.
Read 4 tweets
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Daniela Gabor
@DanielaGabor
good morning to +150 economists who signed our @FT letter calling for IMF-coordinated capital controls to give developing countries policy autonomy for the #coronavirus response
@adam_tooze @Jayati1609 @anninak82 @JoMicheII @BBonizzi @Powell_J_R

ft.com/content/350538…
Nationalisation of bond markets is a good metaphor for what central-banks in high income countries have done against #coronavirus

Few in the Global South have this luxury.
ft.com/content/3e9abe…
if you wonder is this really necessary, look at the red line, and remember Argentina went through a version of this with Macri, and only stabilised with capital controls.
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Daniela Gabor
@DanielaGabor
short explainer of daily swap lines with @ecb example:

European banks need dollar financing for their dollar assets (loans, bonds, derivative positions etc) or for their clients.

Usually, in non crisis times, they get dollars from USD repo markets or from fx swap markets.
in crisis times, willingness to provide dollar funding shrinks in private markets.

some European banks can borrow directly from US Federal Reserve, but mostly will go to ECB.

The Fed then agrees with the ECB to open up a swap line. for both, it's matter of financial stability
The first leg of the swap: the ECB creates a Euro account for the Fed, the Fed a dollar account for the ECB, at an agreed exchange rate (more accurately, accounts exist and get credited). They 'lend' to each other.

Second leg at future point in time, this transaction unwinds.
Read 19 tweets

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Sebastian Payne
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Today’s 20 page @FinancialTimes Budget special is a thing of beauty. Brilliant reporting and analysis, absolutely worth the cost of a sandwich if you pass a newsagent today.
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Edwin Hayward🦄🏹🗡️
@uk_domain_names
Brexit's already having a massive impact on the UK, even ahead of our official departure from the EU. Here are 250+ fully-sourced examples of Brexit's effects. Jobs going, investment drying up, companies moving assets to the EU, or redomiciling. Project *fact* not project fear.
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Christophe Barraud🛢
@C_Barraud
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Millennial Macro
@MillennialMacro
#demographics #militaries #economies #currencies
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#USA
Bring the manufacturing (jobs) home while negatively impacting China's economy.
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Brad Setser
@Brad_Setser
. @MESandbu has put out a series of excellent columns on the euro area this week. All three are worth reading closely. I wanted to offer a few reactions, as the events of the last ten years have shown that Europe's internal architecture matters globally.

ft.com/content/c4a502…
I very much agree with Sandbu's framing of the problem, namely that a monetary union "should be a source of stability rather than instability, both for the real economy ... and for itself" and that reforms are needed so the euro area can do a better job of demand management
I also agree that the euro area has pioneered, in Greece, some innovative techniques for sovereign restructuring. It "taught policymakers that sovereign defaults can be restructured within the euro, and illustrated good legal techniques for doing them."

ft.com/content/cdb6c9…
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