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Mario Draghi: Stabilisation Policies in a Monetary Union (BIS) Mario Draghi discusses whether the eurozone has increased its ability to stabilise macroeconomic shocks given that crisis has lasted in the region much longer than in other developed regions. The key matters are stabilisation across countries and stabilisation over the cycle.
Are Europe’s Economic Prospects Brighter Than They Appear?(Project Syndicate) Europe is the real loser from the US-China trade wars. The region is still extremely vulnerable to collateral damage, it always has the wrong policy response and is torn by internal political shocks (think Italy). Long-term prospects are brighter, however, driven by aggressive easing.
Nixon Shock, the Reserve Currency Curse, and a Pending Dollar Crisis(Mish Talk) The trade wars are just a hidden mechanism for the US to get rid of the “reserve currency curse”. No one seems to want to hold the World’s reserve currency and are working hard to ensure it stays that way. The EU and Japan have negative rates, China does not float the Yuan but props up corrupt SOEs, and Germany punishes the rest of the EU.
The Curse of Size (Econlib) Size matters – smaller countries have the choice to devalue their currency or go into negative rate territory without much attention and are free to control inflation. Argues that he creation of the euro made the world more susceptible to deflationary traps.
Unconventional Monetary Policy Operations: The Upside for Central Bank Balance Sheet Risks (Orduna, Schwaab) Finds that in exceptional circumstances, a central bank can remove illiquidity-related credit risk from parts of its balance sheet by extending the scale of its operations.