Financial Stability

What caused the fall of discounting bills in September?

Yesterday the FT Alphaville had an interesting blog post on China’s banking system. Among the major financial media it was probably the first who noticed the very detailed changes in China’s loan structure. If we look at the year-to-date number, the outstanding amount of discounted bills, short-term loans and medium &long term loans rose by RMB 831.3B, 3.33T and 2.36T, respectively. However, in September, the outstanding amount of discounted bills dropped by more than 200B while short-term loans and medium and long-term loans continued to rise from the previous month.

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Andy Haldane asks: What have the economists ever done for us?

What makes a good model?

This question is at the heart of Andy Haldane’s recent article for VoxEU titled “What have the economists ever done for us?” (posted below). Read more

Ring-fencing Explained

Everyone wants to ring-fence something, but they can’t agree on what:  Vickers, Liikanen, Volcker.

In all proposals, the idea is to have bank capital separately allocated for some activity, and to prevent that capital from being exposed to any other activity.  Some people want to lock the wild animals in a cage to keep them away from us; some people want to lock the tame animals in a cage to keep them safe from the dangerous world outside. Read more

QE3

Last Thursday, the Fed announced its anticipated third round of balance-sheet expansion, at a fixed rate of about $40B per month "until [substantial] improvement [in unemployment] is achieved in a context of price stability". A relief, perhaps, to see some attempt at boosting the economy. But in a column that appears to praise Bernanke for doing something—anything—Martin Wolf still suspects the policy will fail to live up to hopes, and I am inclined to agree. Read more

Felix Salmon: Curb High-Frequency Trading and End the Stock Market “War Zone”

When Felix Salmon looks at the global equities market he sees a world of free-for-all electronic warfare that likely would be more recognizable to Isaac Asimov than Milton Friedman. Read more

'Economists at Fault for Recent Crises': An Interview with the Bank of England's Andy Haldane

In a recent interview, INET Advisory Board member and Executive Director for Financial Stability at the Bank of England Andy Haldane took aim at the economics profession.

Asked if the economists should shoulder blame for the recent crises, Haldane didn’t pull any punches: Read more

How does China’s Monetary Policy Committee influence monetary policies? - A brief history (1)

Nowadays we see overwhelming comments on China’s monetary policy in the local press every day. These comments could be from the government officials, college professors or research analysts, but one specific group of people have been paid particular attentions to – the monetary policy committee members of the People’s Bank of China.   Inspired by similar studies focused on the Fed’s Open Market Committee, we try to analyze the public remarks of the monetary policy committee members to gain some insights. Read more

Is it possible or even necessary for the Renminbi to become a dominant international currency ?

Since 2009, we have seen a rapid rise of Renminbi in the international trade settlements. China’s exports and imports settled in Renminbi have increased 48 times from January 2010 to December 2011. The Renminbi has also become the third-largest currency for LCs, with 4% market share after the US dollar and the Euro, according to the SWIFT. Many analysts believe these are perfect evidences that the Renminbi internationalization has been successful and it will continue to be very successful in the future. Some even argue that Renminbi will replace the US dollar as the dominant international currency in two decades, because China will become the world's largest economy very soon as what they believe. Read more

INET Spotlight – Dr. YV Reddy: How to save the financial system from itself?

This was the topic for INET Advisory Board Member and former Governor of the Reserve Bank of India DR. Y.V. Reddy as he recently gave the prestigious Per Jacobsson lecture in Basel, Switzerland. Read more

Debunking misconceptions on China?

Recently the research house CLSA issued an in-depth special report on Chinese economy called Misunderstanding China, trying to debunk certain so-called western illusions about China’s economy. Some of its points, such as the party’s influences on domestic financial institutions, the absence of a mature legal system and etc., are fairly reasonable. However, we believe that this report still illustrates a typical optimists’ view on China’s economy that we do not agree with. Therefore, we find it very necessary to clarify our standpoints of the Chinese Economy by raising our counter-arguments to some of CLSA’s assertions, with which we disagree most.

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