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???? via inflation??

What in the world do you think LTRO is through the ECB????????

by Upstate NY on Tue Feb 14th, 2012 at 05:25:41 PM EST
[ Parent ]
That's not inflationary.

The 3-year LTRO is the ECB's way of telling the European banking system "winter is coming and it may last years". Basically the ECB is helping the banks to get into an all-cash position is they so wish, and keep it that way for 3 years with an option to get out of the position at any time after one year.

It has nothing to do with lending to the real economy and any inflationary effect is minuscule because any asset that could be turned into 3-year cash at the LTRO was also able to be turned into 1-week cash any week, at the same interest rate. So any asset that the LTRO turned into cash was cash already for all intents and purposes. That's what monetary policy through the discount window (American usage) or refinancing operations (European usage) does. It does not increase the monetary mass and therefore, for those who believe in such things as the quantity theory of money, it is not inflationary.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Tue Feb 14th, 2012 at 05:32:55 PM EST
[ Parent ]
Wouldn't you say, however, that this is the sort of thing the neoliberals opposed precisely because of their overweaning fears of inflation?
by Upstate NY on Tue Feb 14th, 2012 at 05:57:02 PM EST
[ Parent ]
It's the sort of thing the neolibs should oppose if they believe their own theology.

Whether they actually oppose it or not is an excellent benchmark for whether they are deluded or deceptive. From casual perusal of the reactions, they seem roughly equally split between the two.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 06:00:00 PM EST
[ Parent ]
Spiegel: Deutschlands heuchlerische Monetaristen.

Essentially, monetarists should not oppose the LTRO. Only Austrians should. There are a lot of "neoliberals" who are closet Austrians and who only appear to be Monetarist because, during the 1970s stagflation, both Austrians and Monetarists agreed on policy.

In the current crisis, by and large Keynesians and Monetarists should agree on policy against Austrians.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Tue Feb 14th, 2012 at 06:13:07 PM EST
[ Parent ]

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