My chapter on how market neutrality killed the international euro is now out in the proceedings of the 2023 @ecb legal conference. A quick thread The history of the international euro is dominated by an ideal of market neutrality. The market was meant to favour the euro as a currency for trade and store of value solely due to the ECB's successful pursuit of price stability

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So many great insights in this blockbuster article by Will Bateman on the history of US monetary financing, from before Independence all the way up to post-2008 QE
A 🧵with some things I learned
https://t.co/PLQbcCpSTYpapers.ssrn.com/sol3/papers.cf…
Bateman shows that widespread ideas about Fed funding to the treasury are deeply misguided: monetary financing has been a historically invariant feature, also in the US. But the extent is quite enlightening.

This week, I received angry text messages from Noah Smith demanding an apology for saying his blogs on @IsabellaMWeber were “silly polemics”. So I dug into his writings and, my friends, it’s worse than just silly.

Do join me for a tour of @Noahpinion on Isabella Weber’s work. His recent blog targets a nice @NewYorker piece by @zachdcarter that sets out a journalistic, but factual and precise account of what went down last year

A new political economy of hiking monetary policy rates is slowly coming into focus, and it's not pretty: high profit margins for MNCs, abundant collateral for banks, unemployed workers and a middle class property crash. A 🧵 Hiking rates is an economically painful and somewhat unfair way to fight inflation; in particular, if it’s caused by commodity prices and corporate profiteering. But political economists care: painful for whom?

The French model of postwar interinstitutional coordination was well-known to the drafters of the ECB statutes and 1990s efforts to prohibit coordination were simply unsuccessful.

In my comments on @MonnetEric's recent work I show there is ample scope for an ECB Credit Council The special issue of Accounting, Economics, and Law: A Convivium edited by @MatthiasThiema3 is turning into a great debate over the future of the EU's monetary constitution

Many interesting insights in @deyris_j excellent blow-by-blow account of the forging of a climate consensus at the @ecb
Some highlights relevant for the future of ECB politics👇 1. Not (merely) a figment of the ordoliberal imagination: central bankers did talk a lot about climate in 2021...

1/ Why are @ecb central bankers so keen to raise rates? I have seen a few theories - erroneous macro, reputation management, class warfare - but none make sense to me. Consider @KlaasKnot 2/ Central bankers are well aware that raising rates may not really help fight today's inflation.
So a lot a lot of sensible people say: by raising rates they defend their credibility and displace blame for high prices. @ErikFossing @newlefteviews @Pawel_Tokarski @clemfon

In February 2021, @nikdeboer and I placed a freedom of information request for documents pertaining to the @ecb's secondary objectives.

Now online, in @JCSMJournal, an article to sketch a future of monetary-fiscal coordination beyond price stability.

A 🧵with main findings We show that the ECB’s secondary mandate was discussed regularly until 2002, but then dropped almost entirely from central bank speeches.

This is strange, as the secondary mandate is legally binding, and hence (we argue) it is illegal to simply ignore it.

Ok friends time for a quick thread on the unfolding Sterling crisis. The (non-FT) media and the twitter economists seem to have forgotten some real world market plumbing issues again… Liz Truss’s money handout to the rich needs to be paid for, so the UK will this year issue £194bn in debt (a lot more than the £62bn previously planned). Who will buy that debt?

Out #openaccess! ‘Rethinking Monetary Sovereignty’ (with @steffenmurau)

On the state, global credit money, currency hierarchies and the inadequacy of our current conceptions of monetary sovereignty.

A 🧵
doi.org/10.1017/S15375… The idea that monetary sovereignty consists in issuing and regulating a currency is deeply anachronistic; it rests on a quasi-Westphalian vision of state money and independent monetary jurisdictions.

To show this, we put forward a new account of the global monetary system.

If, ok * if *, you watch one conversation on the politics of central banking this summer, make it this historic exchange @DeBalie between @STOmarova and @KlaasKnot on democracy, @RaboFoodAgri and hiking rates into a crisis...

Some highlights: "you can never check what happens in my mind ... I still believe that ... the kind of deliberations we we have are truly about an unbiased assessment of where we believe we are in the business cycle"

As Europe is burning, the ECB's monetary policy is set to stop those long-term investments most needed to decarbonize and prevent future inflationary shocks.

In this @GRI_LSE report I explain how a smart hike could avoid this disastrous outcome. A 🧵

lse.ac.uk/granthaminstit… Raising interest rate *may* (caveats apply) bring inflation down today, but would cut off investments in renewable energy, energy efficiency and climate adaptation. /2

Why is the ECB Governing Council currently in an emergency meeting? What are PEPP reinvestments? Why are they the main tool of the ECB to fight a new Eurozone crisis now on the horizon? And what more powerful tool is needed? A 🧵 The ECB balance sheet now holds €1.6 trillion in government bonds bought since 2020 to facilitate the record deficits created by the pandemic emergency.

Interesting discussion on Green TLTROs and their feasibility. My view is that the main justification for green monetary policy is not narrowly "promotional", as in promoting some broader economic policy goals external to price stability. Rather, they have a rationale in terms

https://twitter.com/deyris_j/status/1536370949343260673

of both the primary mandate (long term price stability; also part of the new strategy) and reducing the negative side-effects of high interest rates on long-term investments (which are needed for the green transition and hence part of the proportionality assessment).

The @BIS_org just published what looks to be a very important book, showing that in unequal societies (like ours) accommodative monetary policy is a bad way to deal with recessions The key idea is that inequality and recessions exacerbate each other:

Saying the central bank has an "inflation brake" is a mistake on a par with the idea that the state is a household that must pay back its debt.

Just some comments on this particularly vapid unsigned @TheEconomist piece. 1/
economist.com/leaders/2022/0… The metaphor is so compelling: the economy is like a car and governments are reckless drivers. Good that a responsible central bank is there to hit the brakes and stop inflation. But what is that brake? /2

Out #openaccess!

With @apsmolenska we provide a birds-eye view of a bewildering world of EU climate finance policy. We argue for a radical overhaul, to make the prudential regulation of risk much more political. A 🧵 /1

@JFinReg Paper available here:
academic.oup.com/jfr/advance-ar… As the @ECB recently acknowledged “few institutions have put in place Climate and Environmental risk practices with a discernible impact on their strategy and risk profile.” Banks are sleeping, greenwashing is rampant. /2

Finally out! On the European Central Bank, technocracy, and one of the most painful chapters in European integration: the #ECB’s treatment of sovereign debt (going from 1988 till 2020)

A quick summary 👇 /1
#Openaccess academic.oup.com/ser/advance-ar… In 2005, the ECB’s treatment of sovereign debt became market-based. From then on, any government whose debt lost the approval of Moodys, S&P and @FitchRatings would no longer be accepted by the ECB /2

Did policymaking really change after 2008? Not immediately, but a genuine paradigm shift is taking place… amongst central bankers and EU technocrats setting financial and fiscal rules.

Technocratic Keynesianism - A summary👇

Open access at @NPEjournal: tandfonline.com/doi/full/10.10… In 2020, the European Central Bank funded 92% of the pandemic deficit incurred by Member States fighting the pandemic – I show that this is monetary financing in all but name

This is BS of course "Mr Weidmann said such a move would contradict the principle of market neutrality that is enshrined in EU law." ft.com/content/60d983… @OlafStorbeck @MAmdorsky /1 The term “market neutrality” is not from the Treaty but rather a very recent addition to ECB vocabulary. In fact, in a 2008 paper ECB officials explicitly deny that its operations are “market neutral”. ecb.europa.eu/pub/pdf/scpops…
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