The ECB can and should do more to boost lending in the euro area. The central bank could lower the policy rate further and accelerate money supply growth. The ECB could also create a negative deposit rate, provide banks with liquidity, and adopt a version of the U.K.'s "funding-for-lending" scheme. Earlier this month, the European Central Bank surprised markets by lowering its main refinancing rate by 25 basis points to 0.25%.
Techies around the world were all atwitter last week—not just about Twitter's initial public offering, but also about a new record value of $395 for the digital currency bitcoin. Earlier this year, the virtual currency hit a high of $230 after bank depositors in Cyprus were hit with taxes to bail out failing banks before crashing to $50. The currency's creator, who uses the pseudonym Satoshi Nakamoto, envisioned a means of exchange immune to the political or economic fortunes of any single country.
Higher global interest rates and depreciating currencies push up borrowing costs and debt servicing obligations for Asian governments and corporates. Foreign currency borrowing is still perceived as a risk to Asia’s economic and financial stability. Capital inflows linked to easy global monetary settings have lifted foreign ownership rates in Asia's local currency bond markets. Strong growth in local currency bond markets helps to reduce liquidity concerns, exchange rate risk, and the threat of financial turmoil.
Germany's growing current account surplus may be weakening the global recovery. Despite relatively strong economic conditions, German domestic demand remains soft. A large investment gap reduces the country's long-run growth potential. In a report published last week, the U.S. Treasury sharply criticized Germany for its export-facing economic policies.