Given a recent review of Financial times, I just read a few articles about upcoming ECB decisions pending for the early days of december. ECB will probably increase the importance of QE for the eurozone. It will probably continue to cause a deterioration of the EUR/USD rate. EUR/USD has already reach a low rate : 1 EUR = 1,06 USD. It’s possible that the EUR is going to decrease even more. An easy explanation to this decrease and any further development is by definition linked with the QE itself. Everytime the ECB is going “whatever it takes” to get an EU average inflation rate of around but below of 2% (the only aim of the ECB policy compared to the US federal reserve), private and public debt purchases are increasing the liability part of the ECB balance sheet through money creation. The ECB is creating EUR out of the blue to purchase public and private debt, betting that this behavior will encourage commercial banks and investment banks to lend more to companies and household in order to get more inflation (and consequently more growth).
In recent posts and in my page about bibliography, I already talked about the following book “the banker’s new clothes”, a book about regulation and leverage which explains why banks are reluctant to decrease their leverage (ratio between the bank own money or equity- “les fonds propres en français” – and the money that the bank has created through loans and money creation). According to this book, the banks are reluctant to get more equity and less leverage because they know that they will be bailed out by states in case of any problem to avoid a financial crisis to become an economic and social crisis like in the late’s 20s.
I noticed an interesting and small article about leverage, fractional reserve lending and reserve ratio requirement. Please enjoy …
The Financial Stability Board, which advises the G20 group of countries, said that the world’s 30 biggest banks should raise up to $1.2 trillion (or $1.200 billions or $1.200.000 millions or more or less the size of the French public budget) in loss-bearing debt on top of their equity capital. By compelling banks to issue debt that can be written down in times of trouble, the goal is to make creditors liable for a bank’s failure, rather than taxpayers. Under the proposals a bank would fund at least 18% of its risk-weighted assets with such debt and equity by 2022. Mark Carney, the governor of the Bank of England, who also chairs the FSB, said that if adopted by regulators, the plan would “support the removal of the implicit public subsidy” enjoyed by banks that are “too big to fail”.
Ces graphiques et informations sont mentionnées dans le livre de Sapir, au sein d’une note de bas de page. Il m’a semblé intéressant de les partager. Sous forme de publication incrustée ci-dessus ainsi que sous forme de lien ci-dessous, puis carrément de fichier excel original tout en bas, deuxième lien. Le fichier excel est alors à télécharger et à ouvrir avec Excel 1998-2004.
J’ai découvert ce lien et cette application excel par le biais d’une note de bas de page du livre de l’économiste Sapir “Faut-il sortir de l’euro ?”. Un livre assez riche, particulièrement critique autour de la position de l’Allemagne au sein de la zone euro, dont la thèse principale, si elle peut être contestée, a toutefois le mérite d’être étoffée par des argumentations et observations des mécanismes économiques et financiers particulièrement éclairantes.