Macro Mondays
#23 - Are central banks insolvent? Guest: Dario Perkins
Nov 12, 2023
Dario Perkins, central bank watcher and creator of the Perkins rule, discusses central bank insolvency, fiscal consequences of quantitative easing (QE), and the impact of Asian trade on Federal Reserve's decision. They also explore the long-term consequences of QE and delve into the factors driving the recent move in Bitcoin.
58:29
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Quick takeaways
- Central banks can face negative equity and operating losses with fiscal consequences and potential impact on their independence.
- European central banks have overtightened, leading to a bigger monetary squeeze on a weaker economy, signaling a deflationary environment.
Deep dives
The impact of central bank insolvency
Dario Perkins discusses the implications of central banks facing negative equity and operating losses. While central banks cannot go bankrupt, these losses can have fiscal consequences and potentially dilute their independence. Perkins encourages central banks to develop mechanisms that automatically address losses and maintain their independence.
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