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Wednesday, 6 April 2016

Central Banks Can't Go Broke? Hmm...

"They cannot run out of the which they create"  ?????

The ECB Explains Why Central Banks Can't Go Bankrupt in a Footnote  

This morning the European Central Bank published a research paper titled "Profit distribution and loss coverage rules for central banks."
The paper dryly outlines how central banks account for profits and losses, and how those profits and losses are distributed to the shareholders of those central banks—usually the state in which they are based.
The paper is useful though, for one very important point it makes. As the ECB engages on its expanded €80 billion per month asset purchase program, questions will arise over what would happen should the central bank make a loss on those purchases.
In talking about profitability of a central bank the ECB says in its paper that it is not necessary for a central bank to make money, as this is not a useful measure of the efficacy of the bank. While noting that profitability may be useful for a central bank's credibility, the paper makes the critical point that losses made by a central bank do not lead to the bank needing to be recapitalized, or the bank becoming insolvent. 

“Once GDB spends its last remaining funds — and it is only a matter of time — many essential services in Puerto Rico may come to a halt,” the hedge funds said in their complaint. By then, they said, there would be nothing left for the bank’s creditors, who “will suffer substantial losses.”

Not even the prospect of leaving Russia’s budget in the red until 2018 will force reductions in social or defense spending, the two items that dominate government expenditure, a Bloomberg survey of economists showed.

Australia's central bank warned that a rising currency could interfere with a transition to a broader based economy Tuesday, fueling expectations of interest rate cuts to come later in the year after the bank kept its powder dry at its latest policy meeting.

Russian energy minister says may meet 

Saudi counterpart before Doha event

Russian Energy Minister Alexander Novak said on Monday that he may meet his Saudi Arabian counterpart before a planned oil producers’ meeting in Doha on April 17. Saudi Arabia, the world’s top oil exporter, will agree to freeze crude oil production levels only if Iran and other major producers do so, the kingdom’s deputy crown prince said in an interview with Bloomberg last week. “If there is such an opportunity, surely we will talk to our colleagues,” he said about a possible meeting with his Saudi Arabian colleague. Iran has said it will not join fellow OPEC and non-OPEC members in a plan to be discussed in Doha to freeze oil production to boost prices. Novak also said he hoped that a common position would prevail at the […]

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