ECB strategy explained

The video discusses the European Central Bank's (ECB) balance sheet, focusing on its exposure to national central banks and private banks. It explains the payments imbalance within the ECB, where some regions run deficits while others accumulate surpluses. The German Central Bank's role in sterilizing these imbalances by selling bonds is highlighted. The video also covers the recent breakdown of interbank funding markets, leading to increased ECB intermediation. A potential shift in ECB strategy is proposed, where the ECB would lend directly to private banks, reducing national central banks' balance sheets and embracing the lender of last resort function.

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