Vortrag von Ingo Sauer am 27.06.2019: "(Mis-)Leading Textbooks and the Dark Side of the Central Bank's Balance Sheet: Why Economists do not understand the Risks involved in the Target Balances"

Im Rahmen des Forschungskolloquiums des Instituts für Wirtschaftswissenschaften der Universität Freiburg möchten wir Sie herzlich zum Vortrag von

Ingo Sauer

(Goethe Universität Frankfurt)

 
über das Thema

(Mis-)Leading Textbooks and the Dark Side of the Central Bank's Balance Sheet: Why Economists do not understand the Risks involved in the Target Balances

einladen.

Der Vortrag findet am Donnerstag, 27. Juni 2019, 12:00 Uhr s.t. in HS 1142 (KG I) statt.

Abstract 

During the discovery that some central banks of the Euro system held enormous claims (Target) against that system as an eminently important share of their assets a simple question was raised: what would happen if the euro falls apart, these Target claims are not settled and some central banks become (technically) bankrupt?

Most economists believe, however, that the concept of solvency is not applicable to central banks and that the assets of the central bank are therefore not related to variables like the exchange rate and the price level. Even fatal central bank losses – like for the Bundesbank in the above mentioned scenario – would neither affect the stability of the currency nor the price level since the money supply stays constant in such a scenario. This (questionable) belief in the “irrelevance” of the central bank’s assets originated from the quantity theory of money which is prominently presented in all modern textbooks and typically justified by the four famous hyperinflations after WWI.

We show in an empirical analysis of the complete respective central bank’s balance sheet that each hyperinflation was caused by the respective central bank’s insolvency and terminated by the bank’s recapitalization. The money supply, in contrast, represented only an erroneously interpreted concomitant that – taken for itself – can neither explain the inflation nor its end.

Therefore, we conclude that the mentioned belief in the “irrelevance” of the central bank’s assets is completely misleading and that an immediate recapitalization of the Bundesbank will be necessary if (e.g.) the Euro system breaks apart.