Germany-Watching: Economics (U.S. Money Market Fund Reform)

from Deutsche Bundesbank Eurosystem’s Bundesbank Research Centre:

You Can’t Always Get What You Want (Where You Want It): Cross-Border Effects of the U.S. Money Market Fund Reform [PDF]

Authors: Daniel Fricke, Stefan Greppmair, Karol Paludkiewicz

Non-technical summary
Research Question

Money market funds (MMFs) are an important part of the growing segment of non-bank financial intermediaries. This paper contributes to this literature by analyzing the cross-border effects of the 2014 U.S. MMF reform, which was implemented several years prior to the EU Regulation. We study whether euro area MMFs received inflows as a consequence of the reform and investigate the (unintended) economic effects on the basis of the non-synchronized implementation dates of the regulatory changes in the U.S. and the EU.

Contribution

To the best of our knowledge, we are the first to examine the cross-border effects of the 2014 U.S. MMF reform. Prior work has shown that the reform led to a substantial decline of the institutional prime segment in the U.S. (MMFs that invest primarily in non-sovereign debt instruments). Moreover, these funds increased their risk-taking due to the increased competition and newly imposed liquidity restrictions left these funds more prone to large outflows (run risks).

Results

We document both positive and negative effects of the U.S. reform on institutional MMFs in the euro area. These funds, particularly those from the prime segment, experienced substantial inflows from foreign investors around the implementation of the U.S. reform and we show that these cross-border flows were largely motivated by the search for money-like instruments. While euro area MMFs reduced their risk-taking, the industry as a whole has become more concentrated and possibly more exposed to run risks. This risk materialized in the COVID-19 induced stress period during which these funds faced large outflows by foreign investors.

Read the full discussion paper [archived PDF].

World-Watching: This Week in Petroleum

(from the U.S. Energy Information Administration, This Week in Petroleum)

Release Date: February 24, 2022

Low Inventories and High Demand Boost Global Distillate Crack Spreads

Rising crude oil prices, low refinery production, and high consumption of distillate fuel, which includes diesel fuel and heating oil, have contributed to the highest nominal (not adjusted for inflation) middle distillate prices since 2014 (Figure 1). The front-month futures price for ultra-low sulfur diesel (ULSD) for delivery in New York Harbor (NYH ULSD) reached as high as $2.96 per gallon (gal) on February 14, 2022. On that same day, ULSD priced in the Amsterdam, Rotterdam, and Antwerp (ARA) hubs of Northwest Europe reached $2.74/gal, and distillate fuel oil priced in Singapore (Singapore 500 ppm) reached $2.54/gal. Prior to October 2021, distillate prices had not exceeded $2.50/gal in any of these three major pricing hubs since 2014.

Read the EIA analysis [archived PDF]

Data (Excel .xls files)

Join Us for Conversations on Central Banking: Inflation and Monetary Policy

The Center for Inflation Research and the Federal Reserve Bank of Cleveland invite you to attend Cleveland Fed Conversations on Central Banking, on Tuesday, March 1, 2022, from 2:00 – 2:40 pm EST. The session topic will be Inflation and Monetary Policy.

Distinguished panelists include:

Jason Furman, Aetna Professor of the Practice of Economic Policy, Harvard Kennedy School.

Catherine Mann, Monetary Policy Committee Member, Bank of England

Ricardo Reis, A.W. Phillips Professor of Economics, London School of Economics and Political Science.

The session will be moderated by Colby Smith, U.S. Economics Editor, Financial Times.

View the entire agenda [archived PDF].

You must register in advance to attend. Upon registering, you will receive a confirmation email containing additional instructions to join the virtual meeting and a way to add it to your calendar.

If you have any questions, please contact Diane.Roberts@clev.frb.org.

“The Parliament of Man, the Federation of the World”

A Visionary Line from Tennyson’s Poem

“Locksley Hall” by Alfred, Lord Tennyson

Among the most optimistic visions ever put in poems or speeches are these words from the poet Tennyson. The line from his poem, “Locksley Hall,” envisions “The Parliament of man, the Federation of the world” which remains a vision of human solidarity that haunts the imagination.

The larger couplet in the poem captures the idea of a post-violent and post-anarchic world:

“Till the war-drum throbb’d no longer, and the battle-flags were furl’d
In the Parliament of man, the Federation of the world.”

“Locksley Hall” (1835/1842)

Comrades, leave me here a little, while as yet’t is early morn:
Leave me here, and when you want me, sound upon the bugle-horn.

’T is the place, and all around it, as of old, the curlews call,
Dreary gleams about the moorland flying over Locksley Hall;

Locksley Hall, that in the distance overlooks the sandy tracts,
And the hollow ocean-ridges roaring into cataracts.

Many a night from yonder ivied casement, ere I went to rest,
Did I look on great Orion sloping slowly to the West.

Many a night I saw the Pleiads, rising thro’ the mellow shade,
Glitter like a swarm of fire-flies tangled in a silver braid.

Here about the beach I wander’d, nourishing a youth sublime
With the fairy tales of science, and the long result of Time;

When the centuries behind me like a fruitful land reposed;
When I clung to all the present for the promise that it closed:

When I dipt into the future far as human eye could see;
Saw the Vision of the world and all the wonder that would be.—

In the Spring a fuller crimson comes upon the robin’s breast;
In the Spring the wanton lapwing gets himself another crest;

In the Spring a livelier iris changes on the burnish’d dove;
In the Spring a young man’s fancy lightly turns to thoughts of love.

Then her cheek was pale and thinner than should be for one so young,
And her eyes on all my motions with a mute observance hung.

And I said, ”My cousin Amy, speak, and speak the truth to me,
Trust me, cousin, all the current of my being sets to thee.”

On her pallid cheek and forehead came a colour and a light,
As I have seen the rosy red flushing in the northern night.

And she turn’d—her bosom shaken with a sudden storm of sighs—
All the spirit deeply dawning in the dark of hazel eyes—

Saying, ”I have hid my feelings, fearing they should do me wrong”;
Saying, ”Dost thou love me, cousin?” weeping, ”I have loved thee long.”

Love took up the glass of Time, and turn’d it in his glowing hands;
Every moment, lightly shaken, ran itself in golden sands.

Love took up the harp of Life, and smote on all the chords with might;
Smote the chord of Self, that, trembling, pass’d in music out of sight.

Many a morning on the moorland did we hear the copses ring,
And her whisper throng’d my pulses with the fulness of the Spring.

Many an evening by the waters did we watch the stately ships,
And our spirits rush’d together at the touching of the lips.

O my cousin, shallow-hearted! O my Amy, mine no more!
O the dreary, dreary moorland! O the barren, barren shore!

Falser than all fancy fathoms, falser than all songs have sung,
Puppet to a father’s threat, and servile to a shrewish tongue!

Is it well to wish thee happy?—having known me—to decline
On a range of lower feelings and a narrower heart than mine!

Yet it shall be; thou shalt lower to his level day by day,
What is fine within thee growing coarse to sympathize with clay.

As the husband is, the wife is: thou art mated with a clown,
And the grossness of his nature will have weight to drag thee down.

He will hold thee, when his passion shall have spent its novel force,
Something better than his dog, a little dearer than his horse.

What is this? his eyes are heavy; think not they are glazed with wine.
Go to him, it is thy duty, kiss him, take his hand in thine.

It may be my lord is weary, that his brain is overwrought:
Soothe him with thy finer fancies, touch him with thy lighter thought.

He will answer to the purpose, easy things to understand—
Better thou wert dead before me, tho’ I slew thee with my hand!

Better thou and I were lying, hidden from the heart’s disgrace,
Roll’d in one another’s arms, and silent in a last embrace.

Cursed be the social wants that sin against the strength of youth!
Cursed be the social lies that warp us from the living truth!

Cursed be the sickly forms that err from honest Nature’s rule!
Cursed be the gold that gilds the straiten’d forehead of the fool!

Well—’t is well that I should bluster!—Hadst thou less unworthy proved—
Would to God—for I had loved thee more than ever wife was loved.

Am I mad, that I should cherish that which bears but bitter fruit?
I will pluck it from my bosom, tho’ my heart be at the root.

Never, tho’ my mortal summers to such length of years should come
As the many-winter’d crow that leads the clanging rookery home.

Where is comfort? in division of the records of the mind?
Can I part her from herself, and love her, as I knew her, kind?

I remember one that perish’d; sweetly did she speak and move;
Such a one do I remember, whom to look at was to love.

Can I think of her as dead, and love her for the love she bore?
No—she never loved me truly; love is love for evermore.

Comfort? comfort scorn’d of devils! this is truth the poet sings,
That a sorrow’s crown of sorrow is remembering happier things.

Drug thy memories, lest thou learn it, lest thy heart be put to proof,
In the dead unhappy night, and when the rain is on the roof.

Like a dog, he hunts in dreams, and thou art staring at the wall,
Where the dying night-lamp flickers, and the shadows rise and fall.

Then a hand shall pass before thee, pointing to his drunken sleep,
To thy widow’d marriage-pillows, to the tears that thou wilt weep.

Thou shalt hear the ”Never, never,” whisper’d by the phantom years,
And a song from out the distance in the ringing of thine ears;

And an eye shall vex thee, looking ancient kindness on thy pain.
Turn thee, turn thee on thy pillow; get thee to thy rest again.

Nay, but Nature brings thee solace; for a tender voice will cry.
’T is a purer life than thine, a lip to drain thy trouble dry.

Baby lips will laugh me down; my latest rival brings thee rest.
Baby fingers, waxen touches, press me from the mother’s breast.

O, the child too clothes the father with a dearness not his due.
Half is thine and half is his: it will be worthy of the two.

O, I see thee old and formal, fitted to thy petty part,
With a little hoard of maxims preaching down a daughter’s heart.

“They were dangerous guides the feelings—she herself was not exempt—
Truly, she herself had suffer’d”—Perish in thy self-contempt!

Overlive it—lower yet—be happy! wherefore should I care?
I myself must mix with action, lest I wither by despair.

What is that which I should turn to, lighting upon days like these?
Every door is barr’d with gold, and opens but to golden keys.

Every gate is throng’d with suitors, all the markets overflow.
I have but an angry fancy; what is that which I should do?

I had been content to perish, falling on the foeman’s ground,
When the ranks are roll’d in vapour, and the winds are laid with sound.

But the jingling of the guinea helps the hurt that Honour feels,
And the nations do but murmur, snarling at each other’s heels.

Can I but relive in sadness? I will turn that earlier page.
Hide me from my deep emotion, O thou wondrous Mother-Age!

Make me feel the wild pulsation that I felt before the strife,
When I heard my days before me, and the tumult of my life;

Yearning for the large excitement that the coming years would yield,
Eager-hearted as a boy when first he leaves his father’s field,

And at night along the dusky highway near and nearer drawn,
Sees in heaven the light of London flaring like a dreary dawn;

And his spirit leaps within him to be gone before him then,
Underneath the light he looks at, in among the throngs of men:

Men, my brothers, men the workers, ever reaping something new:
That which they have done but earnest of the things that they shall do:

For I dipt into the future, far as human eye could see,
Saw the Vision of the world, and all the wonder that would be;

Saw the heavens fill with commerce, argosies of magic sails,
Pilots of the purple twilight dropping down with costly bales;

Heard the heavens fill with shouting, and there rain’d a ghastly dew
From the nations’ airy navies grappling in the central blue;

Far along the world-wide whisper of the south-wind rushing warm,
With the standards of the peoples plunging thro’ the thunder-storm;

Till the war-drum throbb’d no longer, and the battle-flags were furl’d
In the Parliament of man, the Federation of the world.

There the common sense of most shall hold a fretful realm in awe,
And the kindly earth shall slumber, lapt in universal law.

So I triumph’d ere my passion sweeping thro’ me left me dry,
Left me with the palsied heart, and left me with the jaundiced eye;

Eye, to which all order festers, all things here are out of joint:
Science moves, but slowly, slowly, creeping on from point to point:

Slowly comes a hungry people, as a lion, creeping nigher,
Glares at one that nods and winks behind a slowly-dying fire.

Yet I doubt not thro’ the ages one increasing purpose runs,
And the thoughts of men are widen’d with the process of the suns.

What is that to him that reaps not harvest of his youthful joys,
Tho’ the deep heart of existence beat for ever like a boy’s?

Knowledge comes, but wisdom lingers, and I linger on the shore,
And the individual withers, and the world is more and more.

Knowledge comes, but wisdom lingers, and he bears a laden breast,
Full of sad experience, moving toward the stillness of his rest.

Hark, my merry comrades call me, sounding on the bugle-horn,
They to whom my foolish passion were a target for their scorn:

Shall it not be scorn to me to harp on such a moulder’d string?
I am shamed thro’ all my nature to have loved so slight a thing.

Weakness to be wroth with weakness! woman’s pleasure, woman’s pain—
Nature made them blinder motions bounded in a shallower brain:

Woman is the lesser man, and all thy passions, match’d with mine,
Are as moonlight unto sunlight, and as water unto wine—

Here at least, where nature sickens, nothing. Ah, for some retreat
Deep in yonder shining Orient, where my life began to beat;

Where in wild Mahratta-battle fell my father evil-starr’d,—
I was left a trampled orphan, and a selfish uncle’s ward.

Or to burst all links of habit—there to wander far away,
On from island unto island at the gateways of the day.

Larger constellations burning, mellow moons and happy skies,
Breadths of tropic shade and palms in cluster, knots of Paradise.

Never comes the trader, never floats an European flag,
Slides the bird o’er lustrous woodland, swings the trailer from the crag;

Droops the heavy-blossom’d bower, hangs the heavy-fruited tree—
Summer isles of Eden lying in dark-purple spheres of sea.

There methinks would be enjoyment more than in this march of mind,
In the steamship, in the railway, in the thoughts that shake mankind.

There the passions cramp’d no longer shall have scope and breathing space;
I will take some savage woman, she shall rear my dusky race.

Iron-jointed, supple-sinew’d, they shall dive, and they shall run,
Catch the wild goat by the hair, and hurl their lances in the sun;

Whistle back the parrot’s call, and leap the rainbows of the brooks,
Not with blinded eyesight poring over miserable books—

Fool, again the dream, the fancy! but I know my words are wild,
But I count the gray barbarian lower than the Christian child.

I, to herd with narrow foreheads, vacant of our glorious gains,
Like a beast with lower pleasures, like a beast with lower pains!

Mated with a squalid savage—what to me were sun or clime?
I the heir of all the ages, in the foremost files of time—

I that rather held it better men should perish one by one,
Than that earth should stand at gaze like Joshua’s moon in Ajalon!

Not in vain the distance beacons. Forward, forward let us range,
Let the great world spin for ever down the ringing grooves of change.

Thro’ the shadow of the globe we sweep into the younger day;
Better fifty years of Europe than a cycle of Cathay.

Mother-Age (for mine I knew not) help me as when life begun:
Rift the hills, and roll the waters, flash the lightnings, weigh the Sun.

O, I see the crescent promise of my spirit hath not set.
Ancient founts of inspiration well thro’ all my fancy yet.

Howsoever these things be, a long farewell to Locksley Hall!
Now for me the woods may wither, now for me the roof-tree fall.

Comes a vapour from the margin, blackening over heath and holt,
Cramming all the blast before it, in its breast a thunderbolt.

Let it fall on Locksley Hall, with rain or hail, or fire or snow;
For the mighty wind arises, roaring seaward, and I go.

Cultural Influence

The historian Arthur Schlesinger Jr., writing in The Wall Street Journal, quoted the poem to illustrate “a noble dream” that modern US policy decisions may have been neglecting, and he also stated that Winston Churchill considered it “the most wonderful of modern prophecies” and Harry S. Truman carried the words in his wallet.

Lord Tennyson wrote a sequel to “Locksley Hall” in 1886, “Locksley Hall Sixty Years After” [PDF]. In the sequel Tennyson describes how the industrialized nature of Britain has failed to fulfill the expectations of the poem of 1842.

A line in “Locksley Hall” would inspire the title of the historian Paul Kennedy’s 2006 book on the United NationsThe Parliament of Man: The Past, Present, and Future of the United Nations.

In a scene from the American film Marathon Man, graduate student Thomas “Babe” Levy (portrayed by actor Dustin Hoffman) attends an exclusive seminar at Columbia University. During the seminar, his irritable professor, played by Fritz Weaver, quotes the line “Let us hush this cry of ‘Forward’ till ten thousand years have gone” from “Locksley Hall Sixty Years After” [PDF] and then asks if anyone recognizes it. Hoffman’s character is the only one who does (he writes down the title in his notes) but does not reveal this to the class. The professor calls him out on this after dismissing the other students.

In the television program Star Trek: Voyager, the dedication plaque of the USS Voyager quotes from the poem: “For I dipt in to the future, far as human eye could see; Saw the vision of the world, and all the wonder that would be.”

“Locksley Hall” is also the source of the title of Colum McCann’s 2009 novel, Let the Great World Spin.

Also, it includes one of the most famous lines in all of English poetry, the last of the following four, albeit very few are aware of the poem whence it came, and it is often, perhaps usually, misquoted:

In the spring a fuller crimson comes upon the robin’s breast
In the spring the wanton lapwing gets himself another crest

In the spring a livelier iris changes on the burnished dove
In the spring a young man’s fancy lightly turns to thoughts of love.

James Thurber illustrated this poem for Fables for Our Time and Famous Poems Illustrated.

Elizabeth Gaskell mentions the poem in her 1853 novel Cranford. Lines from it are quoted in the 2007 adaptation of the novel.

(Wikipedia)

Alfred, Lord Tennyson, 1st Baron Tennyson FRS was an English poet. He was the Poet Laureate during much of Queen Victoria’s reign and remains one of the most popular British poets. In 1829, Tennyson was awarded the Chancellor’s Gold Medal at Cambridge for one of his first pieces, “Timbuctoo” [PDF, now more commonly written “Timbuktu”].

Born: August 6, 1809, Somersby, United Kingdom
Died: October 6, 1892, Lurgashall, United Kingdom

Global Finance-Watching, Colombia

Colombia’s New Regulatory Framework for Beneficial Ownership: Analysis of Strengths and Weaknesses

by Global Financial Integrity

Countries around the world are increasingly recognizing the importance of establishing beneficial ownership registries as a means to promote transparency and combat financial crimes. As part of this international trend, Colombia passed beneficial ownership legislation in 2021 and emitted regulations for rollout of the registry in 2022. Global Financial Integrity analyzed Colombia’s new legal and regulatory framework for beneficial ownership and identified five strengths and five weaknesses, as are described in this legal review.

Strengths of the Regulatory Framework:
  1. The registry will be anchored to the existing Unique Tax Registry (Registro Único Tributario, or “RUT”).
  2. Mechanisms for updating beneficial ownership information are efficient and digitalized.
  3. Penalties for non-compliance.
  4. The 5% threshold.
  5. Creating an Identification System for Structures that are Not Legal Entities.
Weaknesses of the Regulatory Framework:
  1. Limited information access, both inside and outside of government.
  2. Identifying the beneficial owner.
  3. Reporting responsibilities of foreign-owned companies.
  4. Lack of clarity surrounding verification.
  5. Lack of clarity regarding anti-corruption and anti-money laundering applications.

Read full report [archived PDF]

Is Poetry Sometimes Informative in a Special Way?

The Case of “Dover Beach”

In the previous “Durkheim Anomie” post we saw the following lines:

“In Durkheim’s view, traditional religions often provided the basis for the shared values which the anomic individual lacks. Furthermore, he argued that the division of labor that had been prevalent in economic life since the Industrial Revolution led individuals to pursue egoistic ends rather than seeking the good of a larger community.”

Along these lines, the great English critic Matthew Arnold senses the rise of an anarchic anomie nightmare world coming into view as the old anchors such as religious beliefs crumble away:

Dover Beach

by Matthew Arnold

The sea is calm tonight.
The tide is full, the moon lies fair
Upon the straits; on the French coast the light
Gleams and is gone; the cliffs of England stand,
Glimmering and vast, out in the tranquil bay.
Come to the window, sweet is the night-air!
Only, from the long line of spray
Where the sea meets the moon-blanched land,
Listen! you hear the grating roar
Of pebbles which the waves draw back, and fling,
At their return, up the high strand,
Begin, and cease, and then again begin,
With tremulous cadence slow, and bring
The eternal note of sadness in.
Sophocles long ago
Heard it on the Ægean, and it brought
Into his mind the turbid ebb and flow
Of human misery; we
Find also in the sound a thought,
Hearing it by this distant northern sea.
The Sea of Faith
Was once, too, at the full, and round earth’s shore
Lay like the folds of a bright girdle furled.
But now I only hear
Its melancholy, long, withdrawing roar,
Retreating, to the breath
Of the night-wind, down the vast edges drear
And naked shingles of the world.
Ah, love, let us be true
To one another! for the world, which seems
To lie before us like a land of dreams,
So various, so beautiful, so new,
Hath really neither joy, nor love, nor light,
Nor certitude, nor peace, nor help for pain;
And we are here as on a darkling plain
Swept with confused alarms of struggle and flight,
Where ignorant armies clash by night.

Matthew Arnold was an English poet and cultural critic who worked as an inspector of schools. He was the son of Thomas Arnold, the celebrated headmaster of Rugby School, and brother to both Tom Arnold, literary professor, and William Delafield Arnold, novelist and colonial administrator.

Born: December 24, 1822, Laleham, Staines-upon-Thames, United Kingdom
Died: April 15, 1888, Liverpool, United Kingdom