Right on cue, as soon as I write a post saying that big stuff happens when I'm away, a significant story: ECB Fixed-Term Deposit Auction fails. What does this mean? Well, although I don't have a PhD in economics, allow me to explain it to you in layman's terms: the ECB's attempt to "sanitize" (EDIT: correction: STERILIZE - see, if only I had a PhD in economics...) their bond purchases - they were going to distribute capital by buying bonds, and then remove capital by selling term deposits, so that no net money was created - failed. The banks didn't want to buy ECB term deposits with their precious money. Why? Well, it seems that liquidity is pretty pretty pretty tight right now in Euro-land... I don't think that could ever be considered a good thing.
ok - have at it in the comments - I won't be able to respond, but maybe Kartik Athreya will stop by and tell us mortals how to interpret the failed term deposit auction.
-KD
6 comments:
I'd love to comment as well--but my doctorate is in mixology. . .
Those smarter than us said it was no big deal as banks preserved cash for some other reverse thingy later in the week:
"The shortfall is a clear sign of rising tensions in the money
market as banks hoard cash in preparation for reimbursement to the ECB
of a E442 billion 1-year LTRO that expires Thursday."
http://www.forexlive.com/115937/all/ecb-below-the-mark-in-1-week-term-deposit-draining-operation
Who knows, but it looks bad.
Yo man, stop hatin' on me, dawg. I was just playin' witch'all. I was just pimpin' on Elizabeth Warren, y'all. She tight. Bitches like it when you disrespect them. Makes them all hot and bothered.
Economics PhD representin'.
Your blog is helpful. I strongly believe there are many more helpful comments and insights found in blogs about economic matters than in economic research papers. I have a Ph.D in economics from a top university and found that there are sacred beliefs that no one may challenge without incurring the wrath of those whom you depend upon for recommendations and assistance. The sacred belief at the heart of the mean spirited comments about "economics is hard" concerns the importance of economic research. Yet, most publications are read by few and have a short shelf life. I have engaged with economic thought productively through blogs. Twenty years ago, I asked a highly regarding finance professor if I could write my dissertation on the use of debt in takeovers. He practically screamed, "Debt doesn't matter, read Modigliani and Miller." Highly ranked Professors impose dead ends on many imaginative and creative thinkers, leading many to simply give up. I can't help but think that if some of those discourage researchers had continued and found a place for their voices to be heard, the crisis would not have been so unexpected. Forget the post, and check out http://rajivsethi.blogspot.com/2010/06/on-blogs-and-economic-discourse.html
beaumont, why do you think the crisis was unexpected?
Danny
One simple explanation for why the crisis was unexpected is that those making the decisions, whether regulators or executives, are in some sense encouraged by competitive forces into believing that when prices are going up, good things are happening.
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