Economic Notes for the Week of December 12th

The ECB cut their benchmark rate again by 0.25% down to 1.00% in an effort to ease strains on the ‘system.’  They also expanded the range of collateral for loans to banks, increased the maturity of those loans up to three years and lowered reserve requirements—easing on all fronts.  Policymakers have been hesitant to go full-tilt on quantitative easing measures in the style of U.S. actions in recent years, partially out of the ‘moral hazard’ concern that such measures would reduce the incentive for individual member nations to get their act together.  This is not surprising, but it’s the continuing story of the stronger countries not wanting to set a precedent of bailing out the weaker ones every time things get tough. Read more