Monthly Archives: October 2009
Why do central banks have assets?
If you look at the balance sheet of a central bank, you will see it has liabilities (mostly currency) and assets (normally mostly government bonds/bills). Why do central banks have assets? Do they need them? The wrong answer is that central banks need assets to "back" the value of the currency, and that paper currency […]
The Conservatives adopt a scorched-earth strategy against the PBO
The idea is simple: if you must retreat, leave nothing behind that could be useful (h/t to Support the OPBO). Tories unload 4,476 pages of stimulus details: The Harper government has dumped three box-loads of information about its efforts to stimulate Canada's sputtering economy on Parliament's independent budget watchdog. Kevin Page had asked for more […]
What makes a bank a central bank? Asymmetric redeemability and the will to act as one.
Both central banks and commercial banks issue liabilities that function as media of exchange. Why do we say that it is central banks, rather than commercial banks, that determine monetary policy; setting interest rates in the short run, and inflation in the long run? What makes a bank a central bank?
The Globe’s Konrad Yakabuski succumbs to the monetary union zombie
And so it continues. I noted on Wednesday that the Globe and Mail's lead editorial on exchange rate policy demonstrated a singular lack of understanding of the economics of exchange rate policy. A particularly astute commenter noted that it was only a question of time before the zombie notion of monetary union started lumbering across […]
Economic growth, the universe, and the meaning of life
Notes for a panel discussion in Ottawa on Tuesday evening (details below). 200 years ago, economists made a prediction, and we got it wrong. "Big deal" you might say. But it was a big deal; a much bigger deal than some piddling mistake like failing to predict a global financial crisis. Basically, 200 years ago […]
Why can’t the Fed just buy yuan?
The title really says it all. And it's not a rhetorical question; I don't know the answer. But if the US is really concerned (H/T Mark Thoma) about the US dollar being too high against China's yuan, and it believes China is "artificially" preventing the yuan from appreciating against the dollar by foreign exchange market […]
Cheap talk and the exchange rate
Why does the Loonie appreciate when the Bank of Canada tightens monetary policy (relative to what was expected)? And depreciate when the Bank loosens monetary policy (relative to what was expected)? Before you conclude I've lost it, by asking such an easy question, consider the following weird thought-experiment.
Oil prices in currencies other than the USD
I've received a request to update my irregular series of graphs of movements in oil prices in currencies other than the USD. There's been a certain amount of movement in the oil and forex markets over the past few months, so I'm happy to oblige: The CAD and the euro have appreciated by about 20% […]
Economic illiteracy goes viral
It turns out that I may have been unfair to Patricia Croft (chief economist of RBC-whatever-it-is) over here. As Erin Weir points out, she's not the only high-profile professional economist to go from remarking on the relatively small quantity of Canada's official reserves to making the clanging error of concluding that the Bank of Canada's […]
Economic policy advice for the Liberals: A conversation with the Cheshire Cat
There are reports that the federal Liberals are going ahead with some sort of conference that is to generate some sort of intellectual infrastructure for an eventual platform for an election, to be held – if things continue to go according to current form – in 2012. So this seems to be as good a […]
Worthwhile Canadian Initiative 
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