Loving it:
"The ECB/Eurosystem is by no means the only central bank to act in a quasifiscal capacity, by engaging in transactions and other actions (like imposing reserve requirements) that are from an economic perspective equivalent to making transfer payments, paying out subsidies or grants, and imposing taxes, levies and duties. Both the Fed and the Bank of England have trebled the size of their balance sheets since the beginning of the financial crisis, and have engaged in off-budget and off-balance sheet operations like the Special Liquidity Scheme of the Bank of England and the Maiden Lane, Maiden Lane II and III SPVs incorporated by the Fed in Delaware.
These facilities and the transactions that maintain them are likely to involve both redistribution of wealth and income between financial institutions and tax payers/beneficiaries of public spending and the shifting forward in time of the central banks’ contributions to the budgets of the sovereigns — two manifestations of Weak Fiscal Dominance. In addition, if these central banks can be knocked off their price stability perches, there could be an increase in the NPV of current and future seigniorage and in the NPV of the central bank’s contribution to the sovereign budget. That would be an example of Strong Fiscal Dominance."
