WHEN FRENCH POLICE searched the Paris home of then-International Monetary Fund (IMF) Managing Director Christine Lagarde in March 2013, an undated, handwritten pledge of allegiance from Lagarde to former President Nicolas Sarkozy was uncovered. Later leaked to the press, the letter—presumably written while he was still President—urged Sarkozy to “use me for as long as it suits you and suits your plans and casting call.”
The pretext for the raid on Lagarde’s home was, of course, the investigation into possible misuse of public funds—more than €400 million—in settling a claim on the state by Sarkozy-supporting, French businessman Bernard Tapie. Eventually, Lagarde was found “guilty of negligence in public office” for settling the case, but absent a sentence or formal criminal record from the finding by a special Paris court in December 2016, her position as IMF Managing Director was unthreatened. Continue reading “Goodbye IMF, hello ECB. But what’s the quid pro quo?”
What can we expect of Argentina’s 5th program review? We are told the IMF team arrived in Buenos Areas on Saturday. Presumably the objective is to complete this review by end-September—as this review will be judged against the end-June program targets, already passed. IMF funds can be released before the election, therefore. The implications of the election can be dealt with later. This is the right decision, in my view—despite the challenges facing Argentina. The global community owes Argentina some forbearance. Continue reading “What to expect from Argentina’s 5th Review debt sustainability analysis”
BCRA meltdown pdf.
The Central Bank of the Argentine Republic (BCRA) provides, with a short lag, updates on daily contributions to the change in Peso (ARS) base money. With this, BCRA on Thursday offered a glimpse into their reaction function in response to the acute market pressures that followed the primary election outcome. What can be learnt from this experience?
First, local LELIQ claims on BCRA are flighty. In short, ARS257bn of LELIQs were maturing on Monday 12th August; together with interest (annualized at 62.6%) of roughly ARS3bn this provided a rollover need of perhaps ARS260bn to neutralize the impact on base money. However, they were only able to rollover ARS100bn in LELIQ (at 74.8%.) And so, they replaced less than 40% of the LELIQs falling due. Most (but not all) of the rest contributed to the expansion of base money from ARS1,345bn outstanding as of Friday to ARS1,487bn on Monday. Continue reading “Argentina’s monetary meltdown: What policy reaction function?”
Restoring stability Argentina pdf plus technical annex.
TODAY’S SHARP ARS adjustment from 45.3 per USD on Friday to about 53.0—a depreciation of 14½%—comes as no surprise to anyone who has been studying Argentina’s macro-financial policies in recent years.
The catalyst for the sell-off in Argentine assets, of course, was the outcome of yesterday’s primary election—where the opposition Fernandez-Kirchner ticket defeated the so-called market-friendly incumbent, President Macri, by 15½ percentage points. A return of populism to Buenos Aries can be expected. Continue reading “Recalibrating Argentina’s Ponzi Program”
THE LATEST International Monetary Fund (IMF) program document for Argentina—the 3rdReview—was published earlier this month. This document sheds light on the drivers of the public debt sustainability analysis (DSA) that underpin the program.
Since the issue of debt sustainability in Argentina will recur after the upcoming Presidential elections, it’s worth asking: What are the assumptions that underpin the latest IMF document? Do they make sense? And what does this imply for investors? Continue reading “A note on debt sustainability in Argentina”
Euroarea monetary control pdf version.
It’s remarkable how the euroarea crisis elevated arcane relations between central banks within the Eurosystem to dinner table talk for households across Europe. After decades of disregard, central bank balance sheets and liquidity management are fashionable once more. Continue reading “Is euroarea monetary control now in the hands of official reserve managers?”
[Having just reviewed what I imagined to be the outcome in the event of Leave in the week before the Brexit referendum, I thought I’d drop it online for posterity. This is an abridged version (nothing added, only the scenarios that did not emerge and irrelevant details removed) from that written during the week between the devastating murder of MP Jo Cox and the referendum in 2016. With hindsight, the strength of public finances and the economy is clearly wrong and remains a puzzle to resolve; the business cycle more generally has held up–something to ponder in the period ahead; the prediction of a new PM in Bojo was also (thankfully) wrong; while I completely failed to foresee the recalcitrance of Labour to push back meaningfully against Brexit alongside a few other details… but still, our current predicament was in broad brush terms there to foresee. As to Article 50 extension, which i thought would not be granted, it now seems more a question of whether the UK asks rather if the EU grants, but let’s wait and see. I give myself 6/10, perhaps optimistically.]
*** Continue reading “The UK’s Referendum on the European Union: What Happens Next? [throwback from June 2016]”
AS NEW ECONOMIC Counsellor and Director of Research Department (RES), Gita Gopinath, settles into her new role at the IMF, what might her priorities be to make an imprint on the world’s premier monetary institution? Here’s a suggestion. She might begin by taking control of the IMF’s global forecasts—and do so with a view to rekindling the prospects for global macroeconomic policy coordination. Continue reading “On the prospects for global macroeconomic policy coordination”
To suppose large and successive [external] balances to be formed into a debt is to assume an accumulation of debt which is almost equally incredible.
Henry Thornton, Paper Credit, 1805
PDF: Hidden information_FINAL.
Charts: Hidden information_chartpack.
THERE WAS ONCE a time when international macroeconomics was conducted largely through the prism of the central bank’s balance sheet. Absent all but patchy data or guesswork on external current or financial transactions—such as the overall goods and service balance or net lending abroad—changes in central bank reserve assets, typically specie, served as the only real indicator of net flows against the rest of the world—if not, of course, internal drain. Thus, monitoring balance sheets became crucial for investors. Continue reading “Hidden flows: Asset prices and eurosystem balance sheets”
Here are some notes on public debt sustainability. Since WordPress apparently cannot tolerate equations I am forced to post the pdf version here and the introduction and main themes below: On debt sustainability
Anyone invested in Argentina right now will benefit from reading till the end. Continue reading “On debt sustainability, functional finance, and the transfer problem”