Courtesy of Mish.
Reader Thomas who lives in the Netherlands writes …
Hi Mish,
I am a daily reader of your blog. I live in the Netherlands. Recently I saw an overview of target2 balances, including charts.
Could you explain target2 and what the graphics mean?
Does it really mean that we in the Netherlands work to export goods to the PIIGS-countries and that they are not paying for the goods we deliver?
That instead of receiving money for our goods, we get a promise from the national bank to pay the money? And that we are paying higher taxes to our government, so that they can give that money to the ESM, which gives it to the national banks of the PIIGS?
In essence: are we really giving away our goods for free?
Greetings,
Thomas
Target2 Explained
I replied to Thomas ….
Hello Thomas
Here is a Target2 Balance Example:
If a Greek depositor sends money to a foreign bank (say a German bank), that bank now has additional deposits. To the extent it doesn't want to recycle them (in the past, it may have used them to buy Greek government bonds), it deposits them with a NCB (national central bank) – in this case the Bundesbank (Germany's Central Bank)….
