A cobweb in the Eurotower

Eurotower is the name of the building currently hosting the European Central Bank, waiting to move into its new premises later in the year, but it is not that the cleaning people in the Eurotower are not serious about their job: the cobweb I refer to in the title is the one presented in old microeconomic textbooks.

Should the ECB go quantitative?

Many commentators either complain that the European Central Bank has not followed the FED, the Bank of England and the Bank of Japan on the Quantitative Easing (QE) path of purchasing very large amounts of securities or, more kindly, advice the ECB to go that way, to more forcefully fight the risk of too low inflation [1].

Trust in Europe paid handsomely!

Over the first few days of January, the prices of sovereign bonds of peripheral €-area countries have recorded large increases. This has been matched by positive developments in market access and issuance. In some market commentaries these developments were noted with something of a surprised tone (for having made wrong forecasts about the demise of the €?). Such surprise is indeed surprising, since the posting of large gains by sovereign peripheral bonds is a persistent development that has brought large capital gains to those investors, included the ECB, which bought peripheral bonds when their prices were stressed.[1]

Three liquidity scenarios after the year-end.

There are 3 main scenarios that could develop in the liquidity and money market in the €-area at the beginning of 2014, after the tensions at the end of 2013.

First, tensions could dissipate since the reinforced year-end effect has gone.