March 2012

Renminbi Swap Lines

Last week the central banks of China and Australia announced the creation of a $31bn currency swap line. Like every such agreement, it was hailed as another step towards the renminbi's displacement of the dollar as the world's reserve currency. Are the renminbi swap lines in fact a genuine step forward for the internationalization of the RMB? Read more

Eurocrisis Redux

Entangling alliances or entangling leagues are nothing to the entanglements of cash owingKeynes

The recent BIS Quarterly Review article "European Bank Funding and Deleveraging" takes a stab at connecting all the dots in the Eurocrisis.  It is only 12 pages, but with 8 (triple) graphs, there is a lot here to digest.  Let's take a stab. Read more

Liquidity: Not Like Water (part 1 of many)

Discussion of the results of the ECB's LTRO2 has revolved around the question of hoarding, specifically whether banks are using the newly-created reserves to fund new lending. Answers to this question usually make reference to the amount of overnight deposits held by eurozone banks at the ECB. Read more

Crisis Averted: Understanding LTRO2

Fundamentally, the ECB is trying to keep the ongoing sovereign debt crisis from turning into a full-fledged bank credit crisis.  Three things they are worried about (see here, here, here). Read more