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the ECB has given 100 Billion Euro or so to the irish banks. at 1.00%.

If that's true, it's the repo rate, at one-week maturities.

If it's been overnight lending at the punitive "marginal lending facility" rate, it's 1.75%, when the overnight interbank lending rate is not much higher than 0.25%

All of this lending is overcollateralised, as it is "against eligible assets" at a discount set by the ECB itself at its discretion.

Anyway you look at it, the ECB is making a lot of money on this lending. It's called Seigniorage.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 09:44:05 AM EST
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So what. Do you really think a hedge fund - or any private lender woulds give a credit to the irish banks at 1.75%?

And why should the european and irish central bank not enjoy seignorage?

by IM on Fri Feb 4th, 2011 at 09:48:17 AM EST
[ Parent ]
Oh, it should. But it should not complain about it.

Also, the Eurozone monetary authority shouldn't be the leading driver of the push to bring in the IMF to lend Euros to a Eurozone treasury.

Something really bizarre happened in November.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 09:53:21 AM EST
[ Parent ]

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