CFS Special Counselor and Johns Hopkins professor Steve Hanke delivers the John Ise Distinguished Lecture at the University of Kansas – moderated by CFS Director of Advances in Monetary and Financial Measurement and KU Oswald Distinguished Professor of Macroeconomics.
Hanke and Barnett explored monetary systems throughout the world, tariffs and their effects on trade deficits, abolishing time zones and changing the calendar, plus “everything under the sun.” View video
The Penn Institute for Economic Research (PIER) will offer a workshop on Quantitative Tools for Macroeconomic Policy Analysis. Francis X. Diebold, Enrique G. Mendoza, and Frank Schorfheide will provide training on essential state-of-the-art methods.
Guest Speakers include:
– Guillermo Calvo
– Narayana Kocherlakota
– Donald Kohn (three-hour mini-workshop on the practice of Macroprudential Policy)
The workshop will be held May 4 to May 8 at the University of Pennsylvania. Details are available at http://economics.sas.upenn.edu/pier/tools-workshop.
The CFS co-organized a “Future of the Global Monetary and Financial System: 75 years after Bretton Woods” roundtable with the Euro 50 Group. The roundtable gathered high-level personalities coming from all over the world.
My final takeaways are:
- First, the time is right for the Bretton Woods Institutions (BWIs) to exercise greater leadership. The IMF is uniquely situated to help govern effectively and navigate in an increasingly complex and challenging world. But, with greater complexities and areas of engagement comes the risk of mission creep.
- Second, the international monetary and financial system would benefit from a move with great purpose over time to a more rules-based system.
- Third, policy actions today would benefit from a system-wide and longer-term perspective.
A roundtable summary and conclusions are available at
The conference agenda and bios are available at
Robert Z. Aliber offers his “Reflections on Bretton Woods.” Bob is professor emeritus of International Economics and Finance at the University of Chicago, co-author of Manias, Panics, and Crashes: A History of Financial Crises, and a good friend of CFS.
Bob covers much ground. Topics include:
- The White Mountains, Cog Railroad, and Mount Washington Hotel.
- Bretton Woods Conferences.
- How the Founders of Bretton Woods might view the last 75 years.
- Trade and Tariffs.
- The IMF.
The full report is available at http://www.CenterforFinancialStability.org/research/Reflections_on_Bretton_Woods_101719.pdf.
CFS is delighted to publish a thoughtful piece by Mickey Levy – Berenberg Capital Markets, Chief Economist for the Americas and Asia and Shadow Open Market Committee member.
In “Monetary Realities Facing the ECB, Fed and BoJ: More Easing Won’t Stimulate the Economy,” Mickey digs into the monetary policy transmission channels to assess growth implications of policy alternatives and considers the risks of excessive reliance on monetary easing.
He illustrates why further eases may not be the elixir for future growth. The paper is available at www.CenterforFinancialStability.org/research/Monetary_Policy_Realities_072919.pdf.
The Center for Financial Stability (CFS) recently hosted a roundtable discussion on European Central Bank (ECB) monetary policy with Philipp Hartmann. Philipp is Deputy Director General for research at the ECB and one of the founders of its research department.
Philipp’s presentation – covered the first 20 years of ECB policy, the relatively wide range of monetary instruments, defining new ones, and the strategic underpinning of its policy framework – available at http://www.CenterforFinancialStability.org/research/20190717_ECB_Monetary_Policy_Hartmann.pdf
In a Joint Statement, the Bank of England (“BoE”), the Financial Conduct Authority (“FCA”) and the CFTC said that the United Kingdom’s withdrawal from the European Union would not serve to disrupt existing agreements as to the regulation, or exemptions from regulation, of firms engaged in the trading or clearing of derivatives.
The parties said that:
- by the end of March 2019, the BoE, FCA and CFTC will put in place “information-sharing and cooperative arrangements to support the effective cross-border oversight of derivatives markets and participants and to promote market orderliness, confidence and financial stability”;
- post-Brexit, U.S. trading venues, firms and central counterparties may continue to operate in the United Kingdom on the same basis that they do today; and
- post-Brexit, the CFTC intends to issue new no-action letters and orders to permit UK firms to continue to operate in the United States on the same basis that they do today.
The notes to the document provide a “non-exhaustive list” of existing cooperation documents among the BoE, FCA and CFTC that will require amendment or reaffirmation post-Brexit.
The Bank of the United States was the closest the United States came to having a central bank before establishing the Federal Reserve System. What was later called the First Bank of the United States operated from 1791 until its charter lapsed in 1811. The bank established a nationwide network of branches to help the federal government, its largest customer, transfer funds across the country. It was the only U.S. bank with a nationwide branch network until the 1990s. After bad experience without a national bank during the War of 1812, the federal government chartered what was termed the Second Bank of the United States in 1816. When its charter lapsed in 1836, the bank continued as the United States Bank of Pennsylvania, which failed in 1841 following recessions and financial panics. In all of its incarnations, its headquarters was in Philadelphia and it was the largest bank in the United States.
With three former students of CFS Special Counselor Steve Hanke, I have gathered the balance sheets of the Bank of the United States into a working paper and accompanying spreadsheet file that should be useful for anyone interested in the quantitative study of the financial system during the early years of the Republic. Adil Javat gathered data for the First Bank of the United States, George Gulino gathered data for the Second Bank, and Zackary Baker gathered data for the U.S. Bank of Pennsylvania. Javat and Baker previously published their data and analysis in working papers for Hanke’s Institute for Applied Economics, Global Health, and the Study of Business Enterprise. I filled in a number of holes that remained in their data. The joint working paper is a data paper only, with no analysis. (Here is the link to the whole working paper series: Javat’s paper is no. 74, Baker’s paper is no. 101, and the joint paper is no. 132. Gulino’s paper is unpublished.)
I see two lines of follow-on research that could be worthwhile for somebody else to do, since we lack the time and interest for them. One is to examine the relationships among the far-flung branches of the Second Bank and the U.S. Bank of Pennsylvania for clues about differences in regional financial development. Our paper digitizes the overall balance sheet for the Second Bank and the U.S. Bank of Pennsylvania, but the financial statements also show many important balance sheet items for individual branches, which we did not digitize. (Javat did digitize the branch data from the First Bank, which were far less extensive hence not unreasonably time-consuming for a student term paper.)
The second line of research concerns the liquidation of the U.S. Bank of Pennsylvania after it failed in 1841. The bankruptcy was possibly the largest ever in relation to the size of the U.S. economy. It lasted 15 years, at the end of which creditors were paid in full, though shareholders received nothing. There does not seem to be even any cursory scholarly summary of the bankruptcy proceedings. If adequate records exist, it could be a fascinating case study from the legal, economic, and possibly political angles alike. Nicholas Biddle, the sometime president of the Bank of the United States, destroyed many of its internal documents, but perhaps a trawl through court archives and newspapers will uncover records from which to write an informative account.
I had the pleasure of presenting “Central Banking East and West since the Crisis,” at a discussion hosted by the Shanghai Development Research Foundation (SDRF) and Friedrich Ebert Stiftung.
Key takeaways include:
- Much has changed in China and central banking in the last decade.
- Most analysis of central bank balance sheets fails to incorporate the impact of the People’s Bank of China (PBOC) on the provision of global liquidity. This is a critical error – especially as the Chinese yuan (CNY) moves toward reserve currency status.
- The Federal Reserve, PBOC, Bank of Japan, and Bank of England were early providers of global liquidity in the aftermath of the crisis. Yet, after 2011, central bank liquidity created distortions.
- Extraordinary monetary policies were far from costless.
- Analysis of speculative activity in futures markets after large injections of central bank liquidity reveals that:
- Speculative activity skyrockets.
- Net speculative long positions increase and push valuations upward.
- The volatility of investor positioning or investor switching behavior also increases.
- Removal of excess central bank liquidity remains one of the most formidable challenges for markets today.
For slides accompanying the presentation: www.CenterforFinancialStability.org/speeches/ShanghaiDRF_101518.pdf
On a parenthetical note, after over two decades of travel to China, this was one of my most extraordinary visits.
As the 10-year anniversary of the global financial crisis approaches, assessment of key events before, during, and since is essential for understanding varying dimensions of the crisis.
The CFS Financial Timeline, created and managed by senior fellow Yubo Wang, seamlessly links financial markets, financial institutions, and public policies. It:
- Covers more than 1,100 international events from early 2007 to the present.
- Provides an actively maintained, free, and easy-to-use resource to help track developments in markets, the financial system, and forces that impact financial stability.
- Curates essential inputs on a real time basis from established public sources.
Since 2010, the Timeline has become an integral part of the work done by scholars, students, government officials, and market analysts. View the Timeline.
We hope you find it of use and interest.