I frequently criticize the ECB’s weird inflation target. To their credit, ECB policymakers have finally seen the light: After years of failing to lift inflation up to its objective, the ECB has ditched its target of “close to, but below, 2 per cent”, which policymakers concluded was too opaque and implied a cap on price […]

The ECB should stop playing around with negative interest rates and simply put a prohibitive tax on excess reserves (something I proposed in 2009). If a small amount of excess reserves are needed to clear interbank balances, then exempt a modest amount of bank reserves from the negative 50% interest rate (aka 50% tax rate.)   […]

IMF head Christine Lagarde has been proposed as the new leader of the ECB, replacing Mario Draghi. I don’t feel that I know enough about either Lagarde or the internal dynamics of the ECB to have a firm opinion on this nomination. But the following caught my eye: Lagarde would bring the star quality of […]

Geoff Orwell sent me the following: The idea that monetary policy could use derivative markets to pursue its objectives has appeared in the literature 3) but has very seldom found application. The need to find new tools for the intractable problem of unanchored inflationary expectations could now provide the incentive to test the idea in […]

In recent months there has been a rising chorus of calls for fiscal stimulus, from pundits all over the world.  If I didn’t know better I’d conclude that the world’s major central banks had run out of paper and ink, and that only fiscal policy remained effective. And then I get jolted back into the […]