{"id":19534,"date":"2016-04-05T11:07:21","date_gmt":"2016-04-05T16:07:21","guid":{"rendered":"http:\/\/olduvai.ca\/?p=19534"},"modified":"2016-04-05T11:07:54","modified_gmt":"2016-04-05T16:07:54","slug":"in-20-words-the-ecb-explains-the-business-model-of-every-central-bank","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=19534","title":{"rendered":"In 20 Words The ECB Explains The Business Model Of Every Central Bank"},"content":{"rendered":"<h3 class=\"title\"><a href=\"http:\/\/www.zerohedge.com\/news\/2016-04-05\/20-words-ecb-explains-business-model-every-central-bank\" target=\"_blank\">In 20 Words The ECB Explains The Business Model Of Every Central Bank<\/a><\/h3>\n<div class=\"node\" data-mediaconductor-processed=\"true\">\n<div class=\"content\">\n<p>There were two notable things about a report released by the ECB this morning as part of its Occasional Paper Series titled &#8220;<a href=\"http:\/\/www.ecb.europa.eu\/pub\/pdf\/scpops\/ecbop169.en.pdf\"><strong>Profit distribution\u00a0<\/strong>and loss coverage rules for central banks<\/a>&#8220;, which purportedly analyzes &#8220;<em>how profit distribution rules can affect the amounts distributed and the financial strength of central banks.<\/em>&#8221;<\/p>\n<p><strong>The first highlight, was the very basic asymmetry at the core of the actual analysis\u00a0<\/strong>&#8211; how can one talk of profit of there is no possibility of loss? Printing money to fill &#8220;loss&#8221; gaps by definition obviates any calculation of profit since the whole premise of risk\/return does not exist.<\/p>\n<p><strong>The second highlight comes from footnote 7, which tells you all you need to know about the &#8220;business model&#8221; of all central banks<\/strong>, and specifically why they can never go &#8220;insolvent&#8221; &#8211; they can and will just print their way out. To wit:<\/p>\n<blockquote>\n<div class=\"quote_start\">&#8220;Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity.&#8221;<\/div>\n<\/blockquote>\n<p><a href=\"http:\/\/www.zerohedge.com\/sites\/default\/files\/images\/user5\/imageroot\/2016\/03\/27\/ECB%20negative%20equity.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.zerohedge.com\/sites\/default\/files\/images\/user5\/imageroot\/2016\/03\/27\/ECB%20negative%20equity_0.jpg\" alt=\"\" width=\"600\" height=\"250\" \/><\/a><\/p>\n<p>And that, for those curious why every commercial bank in the world is now backstopped by central banks, is all you need to know.<\/p>\n<p><em>Source:\u00a0<a href=\"http:\/\/www.ecb.europa.eu\/pub\/pdf\/scpops\/ecbop169.en.pdf\">ECB<\/a><\/em><\/p>\n<form id=\"fivestar-form-node-528134\" class=\"fivestar-widget\" accept-charset=\"UTF-8\" action=\"http:\/\/www.zerohedge.com\/news\/2016-04-05\/20-words-ecb-explains-business-model-every-central-bank\" method=\"post\">\n<div class=\"fivestar-form-vote-528134 clear-block\"><\/div>\n<\/form>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In 20 Words The ECB Explains The Business Model Of Every Central Bank There were two notable things about a report released by the ECB this morning as part of its Occasional Paper Series titled &#8220;Profit distribution\u00a0and loss coverage rules for central banks&#8220;, which purportedly analyzes &#8220;how profit distribution rules can affect the amounts distributed [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,233,281,282,303,305,538,827],"class_list":["post-19534","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-ecb","tag-europe","tag-european-central-bank","tag-fed","tag-federal-reserve","tag-money-printing","tag-united-states"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/19534","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=19534"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/19534\/revisions"}],"predecessor-version":[{"id":19536,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/19534\/revisions\/19536"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=19534"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=19534"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=19534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}