There was no eurogroup agreement over Greece last night. That was quite predictable. Yesterday's Free Lunch analysis explained that, economically speaking, the solution is obvious; politically, there is a long way to go. Newspaper headlines nonetheless feigned shock - "failure", "breakdown" et cetera - which was predictable as well. While waiting for the politics to play out, it's worth reading Peter Spiegel's rough calculation of how much money a new financing deal might involve - but keep in mind he improbably assumes that there will be no debt restructuring.

Who's afraid of the big bad Fed

"The Fed's out to get us", says Rand Paul, the US senator who has picked up the baton from his father by introducing an "audit the Fed" bill to Congress every year. He did so again at the end of last month, and it has created a bit more anxiety than usual since the US legislature is now controlled by Republicans. Many of them ostensibly share the Paul's allergy to modern central banking.

For those who need to fight this battle, Matt O'Brien's Wonkblog post (aptly titled "Clueless in Kentucky") lists all the ways in which Paul is mistaken about the Fed - not least that it is already subject to many audits and disclosure requirements. What people mean when they say "audit the Fed", Neil Irwin writes on the NYT's Upshot, is "the Fed is doing things I disagree with".

In particular, the "audit the Fed" crowd disagrees with the vast monetary stimulus the Fed has carried out during the crisis. The Fed's in good company - most of the world's central banks have been loosening their purse strings in recent years, and some are still at it, as the chart below shows. Thank goodness for that.

The FT set out its defence of central bank independence early in the crisis. Paul claims to care about the Fed's independence - but only from the executive branch. He wants it to be overseen - ie controlled - by Congress. As Dallas Fed governor Richard Fisher (not exactly a monetary dove) points out, that is a disastrous idea, given that senator Paul and his colleagues have "proven themselves unable to cobble together with colleagues a working fiscal policy". The "audit the Fed" chorus also distracts from intelligent criticism of the Fed, such as the call by Fisher himself to reduce the dominance of the New York Fed within the Federal Reserve system.

The crazy crusade against central banking is not just a matter of politics - it's also very hard to understand how money works, Paul Krugman writes.

Other readables

Numbers news

  • Ukraine has signed a new bailout programme with the IMF. Private creditors expect a restructuring, to judge from current bond prices:
  • The Bank of England's inflation report states that the UK is more likely than not to experience deflation. The central bank no longer rules out cutting its 0.5 per cent interest rate further.
  • Sweden's Riksbank lowers rates below zero.

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