re whether eu / euro would make it to the shore on this side of the darkest interregnum, just in in-tray
From: H
Sent: Sat, June 18, 2011 8:51:00 AM
Subject: Re: Comments - Week of June 13
I think Lorenzo has been adding up all the gold the national central banks that are part of the euro-system hold. That is not legitimate imo, because this gold really 'backs' nothing...it belongs to the national treasuries, even if it is held by the national central banks.
Moreover, Greek , Portuguese and Irish bonds are actually not the only problem or potential problem assets on the ECB's balance sheet. It holds € 360 bn. in 'asset backed bonds' and a similar amount of securities classified as 'non-marketable' (there are overlaps between those). It holds over € 500 bn. in 'bank bonds' - and a number of these banks would surely have gone bankrupt already if not for funding from the ECB. He says 'unless the counterparties go bust' the temporary holdings can not be a problem, and technically this is correct, but on the other hand, the only reason why many of these counterparties are not bust yet is BECAUSE the ECB holds their dreck.
Of course he is quite right in pointing out that the ECB can legally counterfeit as much money as it likes (this is the non-euphemistic version of ' it is not liquidity constrained') , which sort of makes a de facto wipeout impossible, unless it were to misuse that power to such an extent that its currency becomes totally worthless. That is not likely something the ECB would do - since it is a supranational bureaucracy, it will be very eager to do everything that ensures its own perpetuation, and destroying the currency it issues would be detrimental to that cause. The fact that it is supranational is important, because it means it can not be easily politically commandeered - 17 different nations would have to agree on such commandeering, a very unlikely prospect.
On Fri, Jun 17, 2011 at 11:43 AM, M wrote:
Well this is a relief - it appears that the ECB balance sheet is only geared 25 to 1.....
And these "unrealized gains?" Where do they come from? Rallies in long dated German paper? Because everything else seems to be underwater.
Any economists out there that can point the way to the official ECB Balance sheet?
They seem to want to hide it on their official website....
M
blogs.wsj.com
SNIP:
A study from the think tank Open Europe last week estimated that if the value of the ECB’s asset holdings falls just 4.25%, “its entire capital base would be wiped out.”
The ECB is in safer shape than that, Bini Smaghi counters. According to Bini Smaghi, the Eurosystem’s capital plus reserves is more than 80 billion euros. But when its “revaluation accounts” (which are unrealized gains that can serve as buffers against losses) are included, the total rises to nearly 390 billion euros, against around 1.9 trillion euros in total assets. |
