Benjamin Weigert

Roadbike enthusiast and economist. This is my personal account. Views are my own. Retweets are not endorsement.

[Patrick Collison @patrickc]

Met a German founder this week and asked him if all the stories one reads about the challenges of startups in Germany are exaggerated. "No, they're understated." Proceeded to describe spending a full day having a 90-page investment contract read to him (mandatory under German law; § 13 BeurkG) by a notary that then charged €30,000. That was for his first company. His second company, needless to say, was not incorporated in Germany.

[Hanno Lustig @HannoLustig]

Cancel French debt held by the ECB? Why stop there if there is no cost to canceling ECB-held sovereign debt? The Banque de France could simply buy all of the French outstanding sovereign debt and cancel it.

If the BdF buys the entire €3.5tn stock, it funds the purchase with €3.5tn of reserves.** The debt isn't cancelled. It's been converted from ~8-year fixed-rate debt into overnight floating-rate debt. You haven't retired the liability. You've shortened its duration dramatically.

[**A thought experiment.The BdF can't do this, at least not when France is in the Eurozone.]

If you then canceled the debt, the BdF no longer earns any coupons on all the debt it had bought, but it's still paying interest on all of reserves held at BdF, which it issued to fund the purchases. The BdF isn't just paying the interest on reserves French banks happen to hold. It's also paying interest on that TARGET-2 liability to the Eurosystem. Without any coupon income from its bond holdings. Negative carry on €3.5 tn. That does not seem like a great plan. Maybe this is not a free lunch?

Back to reality. Roughly 90% of the Eurosystem's French government bond holdings currently sit on the Banque de France's own book. Only about 10% was bought by the ECB itself, and that slice is the only part subject to risk sharing .

So take the hypothetical €600bn held by the Eurosystem (illustrative numbers):

~€540bn is BdF's, at BdF's risk. France cancelling it is France forgiving itself. Zero net gain, and BdF's equity absorbs the whole hole. Now, you could recapitalize the Banque de France. That's going to cost French taxpayers. Or, if you don't (risky move), the French Treasury receives no dividend from the BdF for decades. Either way, there is cost to French taxpayers that offsets the benefit of lower coupon payments on the bonds.
~€60bn is the ECB's. Losses there are distributed by capital key. France's key is roughly 20%, so France would bear ~€12bn and the other members ~€48bn.

The only way this cancelation proposal makes any fiscal sense is if the BdF stops paying interest on reserves at BdF, mostly held by French banks. Otherwise you lock in negative carry for the BdF. But if you do that, that's a dramatic tax on French depositors and savers. That's what economists call financial repression. (And you've essentially monetized the debt).

Actually, France no longer even has this instrument because the reserve remuneration is decided by the ECB Governing Council, and it applies to the whole Eurosystem. If France did try to do something like this, banks would move their reserves to the Bundesbank in Frankfurt and France would end up with an even larger Target-2 liability.

During COVID, central banks were running huge balance sheets without articulating the trade-offs that are involved. And ex post they were framing any inflation that resulted as supply shock-driven without compelling evidence. If you do that, people might just believe you. They might really think that there are no trade-offs even if they should know better.

And, of course, this proposal violates a bunch of treaties and rules and regulations and laws. Art. 123 TFEU is the monetary financing prohibition. There is no separable "ECB tranche" to cancel. Those bonds are fungible with every other bond in the same series. So any cancellation would be a restructuring of the debt.

[Rudi Bachmann @BachmannRudi]

Und was glaubt der Tweeter hat er damit zur Effektivität des Investitionsboosters ausgesagt? 🤔

[Luis Garicano 🇪🇺🇺🇦 @lugaricano]

An often overlooked consequence of demographic collapse @JesusFerna7026 and Norrick study is that it rules out the most extreme global warming scenarios. The population collapse concentrates on the largest emitters. China, with 1/3 of global emissions, drops to 633m inhabitants on the UN optimistic projection. "Eliminating" 780m people, at 8 tons of CO2 per capita, matters. Casey and Galor (2017) show emissions have been 7 times more sensitive to population than to GDP per capita, hence the fact that pop growth is concentrated in subsaharian Africa (1 ton pc) does not counter that.

The most catastrophic models, RCP8.5 (from 2014, with 3.2–5.4 degrees of warming), and SSP3-7.0 (2020 with 2.8–4.6 degrees) have populations of 12bn humans that continue to increase. I don't think any serious demographer believes that is anywhere near possible. Crucially, demographics' main impact is not on median emission, but on the tail, the catastrophic outcomes. Demographics is a form of "insurance" against a potential slowdown in the technological advances in solar, wind and batteries we have been enjoying.

[John Cochrane @JohnHCochrane]

We disagree with that one. A common currency, walled of from sovereign debt support as originally envisioned, can be a great thing for Europe.

[John Cochrane @JohnHCochrane]

Both analyses take debt as given, leaving out the first step in the game. If the ECB will intervene when it thinks it's in the multiple equilibrium zone, countries have less incentive to run solvent fiscal policies. Then the ECB has to intervene more often. Moral hazard.

[Thiess Buettner 🇩🇪🇪🇺 @Thiess_Buettner]

Die Lösung ist so einleuchtend wie einfach: Einfach nicht mehr schlecht über die Haushaltspolitik reden...

[Daniel Eck 🇺🇦 @eckilepsie]

Vielleicht einfach mal deutlich Tacheles: Die Diskrepanz zwischen Politik und der Arbeitsrealität beginnt schon bei der Vorstellung davon, wie Arbeitnehmer in Deutschland eigentlich arbeiten.

All die Regelungen, Prozesse, Dokumentationspflichten, Arbeitszeiterfassungen, Betriebsvereinbarungen, Gesundheitsprogramme und sonstigen Arbeitnehmer-Wohltaten funktionieren vor allem dort, wo genug Leute dafür bezahlt werden, sie zu verwalten: im öffentlichen Dienst, in Großunternehmen und Konzernen.

Im Handwerksbetrieb, beim Bäcker, im kleinen Hotel oder beim Mittelständler sieht die Welt anders aus. Da muss einfach die Arbeit gemacht werden. Da kann nicht für jede neue Vorschrift eine Stabsstelle gegründet und noch ein Beauftragter eingestellt werden.

Die Politik schreibt Arbeitsrecht für eine Arbeitswelt, die kaum existiert. Jede neue Dokumentationspflicht, jeder zusätzliche Anspruch, jede weitere Einschränkung von Arbeitszeit und Flexibilität wird dort eben nicht von einer HR-Abteilung abgewickelt. Sie landet beim Chef, bei der Buchhaltung oder bei den fünf Leuten, die nebenbei auch noch das eigentliche Geschäft am Laufen halten müssen.

Vielleicht begreift die Politik – und allen voran die SPD – irgendwann, dass sie Arbeitnehmerpolitik in der Tupperdose macht: luftdicht verschlossen, sauber sortiert und völlig abgekoppelt von dem, was draußen im Land tatsächlich passiert.

Wer wissen will, wie Arbeit funktioniert, sollte vielleicht weniger mit Funktionären, Verbänden und Personalräten reden und einmal dorthin gehen, wo morgens jemand den Laden aufschließt, Kunden bedient, Rechnungen schreibt, Mitarbeiter einteilt und am Ende des Monats selbst dafür sorgen muss, dass genug Geld für alle Gehälter auf dem Konto ist.

[Jan Schnellenbach @schnellenbachj]

Man müsste jedenfalls, wenn man China für ein Vorbild hält, den Konsum der Bevölkerung sehr, sehr weit drücken. Um damit Investitionen zu finanzieren, die sich aller Wahrscheinlichkeit nach nicht rechnen.

10/10

[Florian Dorn, MdB @dorn_florian]

Zur Debatte der "Rente mit 63":👇
Wir wollen die gesetzliche Rente #zukunftsfest und #generationengerecht aufstellen.
Die Abschaffung der finanziellen Anreize der abschlagsfreien Frühverrentung ist elementar im Paket für die Stabilisierung und Zukunft der gesetzlichen Rente! 👇

[Patrick Bernau @PatrickBernau]

Lasst den Eheleuten das Splitting!

Wer Eheleute einzeln besteuert, mischt sich in die Arbeitsteilung der Paare ein. Das ist nicht modern. Warum? Ausführlich im FAS-Kommentar:

https://t.co/mQUdD1CFoM

[Vincent Geloso @VincentGeloso]

Okay, I have read this paper and it is horrible. The obvious reply, that many economists have made, is that there is no causality in there.

The problem is that I have not seen many replies that cite actual empirical research, so let me plug this in. On five grounds.

[Benjamin Weigert @benjaminweigert]

@VincentGeloso You could also add Tobias Krahnke's paper to the list who is also looking at the role of program size https://t.co/JM8y90QOV1

[Martin Mühleisen @muhleisen]

If there was ever a time for the IMF to concentrate its resources on surveillance and high-quality lending programs, it is now.

https://t.co/xAeAbThzhq

[Benjamin Weigert @benjaminweigert]

Great choice! All the best @HyunSongShin for your new role!

[Francesco Bianchi @Francesco_Bia]

Congratulations to @HyunSongShin for the new role and to the Bank of Korea for a superb choice!
https://t.co/WOQZXjvX5r

[Benjamin Weigert @benjaminweigert]

@schieritz @PeterBofinger Für Deine Leseliste: https://t.co/HgBxD8hURi

[Volker Wieland @WielandVolker]

Die Studie unseres Beraterkreises Wirtschaftspolitik für BM Reiche zu den Auswirkungen des Iran-Kriegs auf die deutsche und europäische Wirtschaft ist nun online verfügbar. Hier zur Website des BMWE
https://t.co/1w7Im52HoJ

[Linda Teuteberg @LindaTeuteberg]

@papapreuss Schon Ihre Prämisse der Bevorzugung ist falsch. Die Ehe geht mit Rechten und Pflichten einher und ist durch beides gekennzeichnet, darunter Unterhalts- und Beistandspflichten. Unter dem besonderen Schutz unserer Verfassung steht sie aus guten Gründen, vgl. Art. 6 GG.

[Manuel Kallweit @mankall]

@MartinGreive @SVR_Wirtschaft Claudia Buch leitete das Institut in Halle…

[Hanno Lustig @HannoLustig]

Old enough to remember when folks were pointing to the government's interest payments as % of GDP heading to zero in the pandemic to shrug off concerns about debt.

US federal government interest expense as % of GDP. 50 years ago, 25 years ago. now, and 10 years from now (projected). CBO.