Ricardo's threads | Nothing contributes so much to the prosperity and happiness of a country as high profits

When banks hold back: credit and liquidity provision

01/07/2025 European Central Bank Central banks

Banks are reluctant to tap central bank backup liquidity facilities and use the borrowed funds for loans to the real economy. We show that excessively parsimonious borrowing and lending can arise in a stigma-free model where the banking sector has an incentive to overissue deposits. Banks don’t heed the central bank’s call for more credit to finance investment because they simply ignore the collective gains from stronger activity in their atomistic decisions. Central banks can address this market failure by disintermediating market-based finance.

Equity financing in a banking crisis: evidence from private firms

01/07/2025 European Central Bank Central banks

To what extent can private firms’ external equity substitute for debt financing in a banking crisis? To answer this question, I use firm-level data and firm-bank linkages to estimate the causal effect of an imported lending cut from a large German bank on firms’ capital structure and real outcomes. The estimates imply that for every 1 euro reduction in debt, private firms in Germany received 0.27 euros of external equity.

How to Reclaim America’s ‘Democracy’ From the Big Finance Oligarchy

01/06/2025 Ineteconomics Analysis

Sociologist Michael A. McCarthy's latest book shows how ordinary people can take back control of financial capitalism and make it work for them.
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America’s Health Insurance Grinches: A Scathing Indictment of “Market” Economics

12/20/2024 Ineteconomics Analysis

The country’s flawed insurance model, driven by greed, leads to inefficiency, inequality, and denied care - a colossal scam that has sparked fury across the nation.
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The geography of capital allocation in the euro area

12/18/2024 European Central Bank Central banks

We assess Euro Area financial integration correcting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual roles as both hubs of investment fund intermediation and centers of securities issuance by foreign firms. We provide new estimates of Euro Area countries’ bilateral portfolio investments which look through both roles, attributing the wealth held via investment funds to the underlying holders and linking securities issuance to the ultimate parent firms.

Political Investments

12/17/2024 Ineteconomics Analysis

An interview with Thomas Ferguson on the 2024 US election conducted by Andrew Yamakawa Elrod and Tim Barker for Phenomenal World
First published at: Phenomenal World

Trust in central banks

12/17/2024 European Central Bank Central banks

Trust in the central bank is an essential ingredient for a successful conduct of monetary policy. However, for many central banks trust has recently declined, for instance in the wake of the post-pandemic inflation surge, due to large errors in central banks’ inflation forecasts, or given problems when exiting from forward guidance. The rapid, substantial and persistent erosion of trust makes it clear that trust needs to be earned continuously. This paper reviews why trust is important, what determines it and how central banks can enhance it.

Rebooting Antitrust’s Normative Economic Theory

12/16/2024 Ineteconomics Analysis

Industrial organization economists have caused antitrust to cling to an antiquated and disproven economic theory.

Antitrust’s Normative Economic Theory Needs a Reboot

12/16/2024 Ineteconomics Analysis

Welfare economists and moral philosophers have shown that the Consumer Welfare Standard is biased in favor of wealthy individuals and corporations—the very powers the antitrust law is supposed to regulate.

Why do we need to strengthen climate adaptations? Scenarios and financial lines of defence

12/16/2024 European Central Bank Central banks

Adaptation needs are vast, rising fast and difficult to determine in their entirety, especially with uncertain adverse scenarios due to climate inertia and implementation lags. Adaptation is hindered by a lack of a unified understanding of what it necessitates; the challenge in pointing out its costs, benefits, and residual risks; insufficiently prescriptive policy and legal frameworks; and the growing financing gap.

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