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ID:
114689
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| Publication |
2012.
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| Summary/Abstract |
The European Monetary Union (EMU) is inherently unstable, and will be prone to repeated financial and fiscal crises. These crises pose a clear threat to NATO security and the political institutions of Alliance member states. There is no definitive way to eliminate the risks posed by monetary union, but straightforward reforms in EMU sovereign debt management represent a low-cost near-term means of mitigating these risks. With EMU nations facing a seeming leadership vacuum, it is well within NATO purview to press for adoption of such reforms.
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| 2 |
ID:
140231
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| Summary/Abstract |
Where policy has substantially increased central bank assets, the corresponding liabilities present an opportunity to increase the breadth, depth and liquidity of the government bond market. In China's case, transformed illiquid central bank liabilities could double or triple the stock of government bonds. Central bank liabilities can be transformed into government bonds either through the government's purchase of foreign exchange reserves held by the central bank or by the government overfunding its borrowing requirement and depositing the proceeds in the central bank. The overfunding approach is preferred if, for financial stability reasons, it is judged prudent to leave the central bank with sufficient resources to serve itself as lender of last resort in foreign currency to the banking system. In the case of China, public debt consolidation could also contribute to further liberalizing the Chinese banking system, wider international use of the renminbi and more balanced holdings of key currency government bonds.
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