Chris & Jim, many thanks for all your work on these Podcasts, which I don't always agree with, but very much enjoy none the less.
A request please for you to cover something which has always intrigued me, as a layman. I understand the German Central Banks target 2 balance has reached a trillion euro. My specific query is that surely, as a net exporter to the euro zone, then Germany's balance with the rest of the system inevitably grows larger and larger. Thus surely it is funding the rest of the system - well Club Med anyway. If no inroads are made into this balance, and it just grows and grows, at what point do the Germans say - they went into the euro on the understanding that member debts were not to be mutualised and target 2 is mutualisation by the back door. Have I got this right?
Thanks for your kind words Geoff - tell your friends about the bits you like and keep quiet about the bits you don’t 😷
Karl Whelan of UCD is the world’s living expert on Target 2 and l for the most part, he tells us not to worry and the accusations about stealth bailouts if the periphery are inaccurate. Here’s a typical quote: “Despite its new-found celebrity status as a threat to German money and children, closer examination of the TARGET2 payments system generally reveals it to be innocent of most of its accused crimes. The large balances that have built up on the balance sheets of the euro area’s central banks have largely been a by-product of an agreed Eurosystem approach to monetary policy and have not reflected discretionary actions by peripheral central banks or governments. The characterisation of the TARGET2 balances as representing a bailout of these countries or being driven by current account deficits are also largely inaccurate”
Inevitably, it’s complicated. If you are that interested, Karl has written a lot of stuff on this. Here is one, old but still very relevant, link. It’s long - and complex. Hope this helps. Thanks again. https://www.karlwhelan.com/Papers/T2Paper-March2013.pdf
Chris & Jim, many thanks for all your work on these Podcasts, which I don't always agree with, but very much enjoy none the less.
A request please for you to cover something which has always intrigued me, as a layman. I understand the German Central Banks target 2 balance has reached a trillion euro. My specific query is that surely, as a net exporter to the euro zone, then Germany's balance with the rest of the system inevitably grows larger and larger. Thus surely it is funding the rest of the system - well Club Med anyway. If no inroads are made into this balance, and it just grows and grows, at what point do the Germans say - they went into the euro on the understanding that member debts were not to be mutualised and target 2 is mutualisation by the back door. Have I got this right?
Gentlemen your thoughts please.
Thank you in anticipation . Geoff
Thanks for your kind words Geoff - tell your friends about the bits you like and keep quiet about the bits you don’t 😷
Karl Whelan of UCD is the world’s living expert on Target 2 and l for the most part, he tells us not to worry and the accusations about stealth bailouts if the periphery are inaccurate. Here’s a typical quote: “Despite its new-found celebrity status as a threat to German money and children, closer examination of the TARGET2 payments system generally reveals it to be innocent of most of its accused crimes. The large balances that have built up on the balance sheets of the euro area’s central banks have largely been a by-product of an agreed Eurosystem approach to monetary policy and have not reflected discretionary actions by peripheral central banks or governments. The characterisation of the TARGET2 balances as representing a bailout of these countries or being driven by current account deficits are also largely inaccurate”
Inevitably, it’s complicated. If you are that interested, Karl has written a lot of stuff on this. Here is one, old but still very relevant, link. It’s long - and complex. Hope this helps. Thanks again. https://www.karlwhelan.com/Papers/T2Paper-March2013.pdf