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Is the euro a foreign currency to member states? | vox

June 15, 2013

See on Scoop.itMore … or less!

“The insight underlying this strategy is straightforward. Instead of threatening to fully replace investors and de facto become the sole lender to the government, the central bank takes advantage of the fact that continued market access with participation of private investors imposes discipline on the government.

As the required scale of intervention is not determined by the whole financing needs of the government, central bank losses on holdings of sovereign-debt contingent on fundamental default may actually be contained. They may well be fully covered by (current and future) seignorage revenue at the desired level of inflation.”

Manuel J. Matos‘s insight:

Life is learning, even learning how to live in a relatively new economic entity as the Eurozone during a crisis.

See on www.voxeu.org

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