Mini Financial Menu
Lauri Karp. Monday, November 23, 2009
The current crisis in financial markets doesn’t have purely negative effects. Old knowledge gets dressed up in presentable new garb. The reader can see what lies behind these terms.
„The correct combination of letters can produce impressively explosive sentences“
(Benjamin Metz).
| Expression | What is it? | The small print | Cost |
|---|---|---|---|
| Keynesianism | Economic stimulation by increased state spending. Contra-cyclical economic policy as core concept. | „Write-off premium“; „Economic recovery programme 1+2“ | EUR 2.5 bn; EUR 50 bn |
| Quantitative Easing | „Printing money with style“. Central Bank buys bonds or puts long-term liquidity into circulation with minimal conditions. | Purchase of mortgage deeds in USA, business loans in UK and bonds in Euroland | Up to USD 1000 bn, GBP 175 bn and EUR 60 bn respectively |
| Tobin-Tax | Tax on international financial transactions (between 0,05% - 1% per transaction) | Merkel/Steinmeier favour such a tax; Lord Turner (British Finance regulator) favours such a tax for all financial transactions | USD 125 bn |
| „Banks’ Legacy“ | Banks should describe their financial controls in detail, including how they would resolve the situation in the event of their insolvency. Organisational structure not transparent to outsiders. | Example: Lehman Brothers - 1 year later and the complexity of the break-up of the bank; Banks’ Legacy („living will“) discussion in UK and in the EU | Latest: PWC’s GBP 135 m bill for the winding-up |
| Bad Bank | Refinancing vehicle which has zero impact on balance-sheet for debtor bonds of all types which have either already failed or are at great risk of requiring write-downs. | Banks transfer the balance on risk-laden assets to the vehicle and in return receive securities whose full nominal value is booked as offset. | ? |
| Credit Crunch | Major lack of credit causes banks to restrict the credit they are prepared to advance to customers. | Middle-of-the-road business can no longer obtain optimal credit, or only at the expense of additional securities and/or of markedly higher risk. | Cannot be estimated |
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