Typography

Nick Rowe has a post that decries the idea of money as a store of value. He asks: How much would I have been willing to pay for my house if the seller had imposed a condition that I could use it as long as I wanted but could never sell it again, or rent it out to someone else? Less than I paid for it, but still a positive amount. It yields a flow of services even if I can't sell that right. How much would I have been willing to pay for the S20 note in my pocket if the seller had imposed a condition that I could use it as long as I wanted but could never sell it again, or rent it out to someone else? Nothing. My response: That's the same question a value investor asks before buying a stock. The answer usually comes to something like, if I can pay $50 for a stock that is worth $100, then even though I can't resell it in the market I'll still buy it. Because the stock can't be resold, that $50 in value has to be realized through dividends. But if the stock is prohibit...

The argument about ECB Target2 imbalances, an argument which began in mid 2011 with this article, continues to be reignited in various arenas. One component of the argument is the comparison of Target2 to the Federal Reserve’s mechanism for settling inter-Fed settlement imbalances; the Interdistrict Settlement Account. Because the various debaters often have such diverging views on how the Interdistrict accounts are settled, I’m donating this post to the blogosphere with the goal of ensuring that the debate doesn't founder on faulty comparisons of Target2 to the Interdistrict Settlement Account. As such, I'm going to talk a bit about the history of Interdistrict settlement, how the process has changed over time, and how it works now. Once that's done I'll bring the discussion back to Target2 in order to pin down the comparison in a more robust way. I don't claim to know everything about these mechanisms; I've just spent a few weeks educating myself, so if I am ...

A few thoughts on the IMF and SDRs over at the Money View . The IMF and the SDR program are difficult to de-consolidate: As far as I know, the IMF doesn't run the SDR program on its own balance sheet, it just administers the SDR program. Using your example, the EU and the US issue promises to currency which are held in some mutual account managed by the IMF, and that account in turn issues SDRs back to the EU and US. So in effect, the IMF doesn't swap its own promises with the EU and the US. Rather, the US and EU are swapping promises with each other with the IMF as facilitator. That being said, The last time I checked, the IMF was the largest owner of SDRs, all held on its own account.  Here is the current distribution of SDRs across nations and institutions.