Wednesday, 8 October 2008

Don't Look Now

Sterling has a lender of last resort. The Euro does not. The member-states' central banks are their own lenders of last resort. The unlimited liquidity available from central banks at a penal rate against assets is not available to eurozone members. Their central banks can provide liquidity only within the confines of their reserves, as if they were a currency board.

So the ECB can print money but not lend. While the member-state central banks of the eurozone can lend but not print money.

Whoops.

2 comments:

Old BE said...

And of course the ECB is free from "interference" from national governments.

Electro-Kevin said...

Wow !