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  #51  
Old 03-03-2016, 09:09 PM
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When are these Central Banks going to realize they aren't going to fix structural problems with monetary policy?

Japan has been screwed for a long time.
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  #52  
Old 03-04-2016, 08:20 AM
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It's tied more to this thread:

http://www.actuarialoutpost.com/actu...d.php?t=276223

than any particular monetary/fiscal policy
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  #53  
Old 03-04-2016, 01:45 PM
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Quote:
Originally Posted by campbell View Post
It's tied more to this thread:

http://www.actuarialoutpost.com/actu...d.php?t=276223

than any particular monetary/fiscal policy
This is the problem with all fiat inflation driven economies. You can't inflate your way for ever through infinite population expansion
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  #54  
Old 03-10-2016, 03:52 PM
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ECB lowers its rate even more into negative territory AND expands their QE by expanding into the Corporate bond market (i.e. they are buying corporate investment grade names there by picking winners and losers in the bond market).

Draghi DIDNT rule out "helicoptering" money into peoples accounts today during his press conference. Seriously
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  #55  
Old 03-10-2016, 05:10 PM
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....what

http://mishtalk.com/2016/03/10/dragh...-huge-whipsaw/

Quote:
ECB president Mario Draghi pulled out a bazooka today with a package that allegedly exceeded expectations.

QE goes from €60bn to €80bn
ECB to buy corporate bonds
ECB Cut the deposit rate to -0.4% from -0.3%
The main refinancing rate fell by 5 basis points to 0 percent
The Financial Times reported “The euro dropped sharply in response to the package of measures – a clear sign that the central bank had manage to excel even aggressive expectations.”

Oops!

http://mishtalk.com/2016/03/10/dragh...and-aw-shucks/

Quote:
In a series of stunning market reversals, ECB president Mario Draghi’s “Shock and Awe” campaign quickly morphed into “Shock and Aw Shucks”.

Earlier this morning, Draghi pulled out a Bazooka Package that was supposed to sink the Euro and save the eurozone from the alleged evils of deflation.

Draghi’s plan worked for all of 15 minutes. The market then had second thoughts on the Euro, on gold, on the German stock market, and on equities in general.


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  #56  
Old 03-10-2016, 05:34 PM
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It is going to be especially jarring if another recession hits while the Central Banks have already gone all-in...
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  #57  
Old 03-10-2016, 10:53 PM
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Quote:
Originally Posted by Dismal Science View Post
It is going to be especially jarring if another when the next recession hits while the Central Banks have already gone all-in...
FIFY
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  #58  
Old 03-11-2016, 05:21 PM
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more Mish:

http://mishtalk.com/2016/03/10/finan...-money-heaven/

Quote:
Q: Who has negative rates?
A: The European Central Bank (ECB), Sveriges Riksbank in Sweden, the Swiss National Bank (SNB), the Bank of Japan (BoJ), and Denmark’s Danmarks Nationalbank (DN) all have negative rates.

Q: Negative rates on what?
A: The above five countries have negative rates on “excess reserves”. Switzerland also has negative rates on deposits. Most banks are reluctant to put negative rates on deposits fearing bank runs and currency hoarding.

Q: How much are we talking about?
A: Bloomberg Quick Take notes “more than $7 trillion of government bonds worldwide offer yields below zero.”

Q: How do excess reserves come into play?
A: Central banks create them through monetary actions like repos and QE hoping to get credit flowing.

Think of it this way: money is printed into existence even though there are no creditworthy borrowers who want loans.

The irony is banks cannot lend excess reserves. Money lent by one bank will simply appear as excess reserves when the money is deposited elsewhere. Mathematically, someone has to hold every cent of money created by central banks.

Q: Who collects the money?
A: If the central bank charges money on excess reserves, the central bank collects the money. In general, bondholders pay money to hold bonds with negative rates. Borrowers get paid to borrow. Yes, this is absurd.

Q: Who benefits from low and negative rates?
A: Asset holders benefit from cheap money, at least initially. Asset prices went through the roof when ECB president Mario Draghi issued his famous “Whatever it Takes” speech on July 26, 2012. Various rounds of QE by the Fed also sent the stock market higher. The obvious consequence is easy to explain: asset bubbles break, leaving banks and borrowers in worse shape.

Q: Is there a limit to negative rates and resultant bubbles?
A: There is always a limit. Everyone is guessing where it is. At some point the greater fools run out or the consequences are such that policies are abandoned. It’s possible we hit the limit today (March 10, 2016), given the strong reversal following ECB announcements by Draghi, initially interpreted to be a huge bazooka. As it appears now, the bazooka backfired. See Draghi’s “Shock and Awe” campaign morphs into “Shock and Aw Shucks” for further discussion.

Q: Why doesn’t the Fed resort to negative rates?
A: Given negative rates have proven to be of negative benefit, why would the Fed want to? However, central banks don’t see in those terms. Here are a couple of reasons I presume the Fed does understand:

1. Negative rates hurt bank profits.

2. The Fed pays interest on excess deposits. This is a back-door, free-money handout to banks that everyone ought to be protesting. Over time, the Fed has bailed out the banks in numerous ways.

3. The US has numerous money market funds that would immediately be destroyed if the Fed implemented negative rates.


Money market funds are not in vogue in the Eurozone as they are here. Banks can always raise other fees to mask negative deposit rates. Money market funds cannot do the same.

Q: If negative rates hurt bank profits, why has Europe and Japan embraced them?
A: I suspect Draghi believes asset bubbles and equity support will do more for the Eurozone than lost bank profits. Given the collapse of economic bubbles is very damaging, Draghi is very wrong.

Never underestimate the propensity for central bank stupidity.

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  #59  
Old 03-16-2016, 08:01 AM
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JAPAN

http://mishtalk.com/2016/03/15/econo...ally-possible/

Quote:
Economic Theory and Practice: Bank of Japan Says “-0.5% Is Theoretically Possible”
15
Tuesday
Mar 2016
Posted by mishgea | March 15, 2016 10:15:18 | Economics ≈ 4 Comments
In an obvious attempt to boost the Japanese stock market the Bank of Japan discusses further cuts in its already negative interest rate policy.

How deep is the rabbit hole?

Supposedly it’s “theoretically possible for negative 0.5 percent”.


Bloomberg reports Kuroda Says Minus 0.5% Rate Is Theoretically Possible for Japan.
.....
Economic Theory

As long as we are discussing “theory” why not -1.0%?
Why not -5.0%?

If that sounds preposterous please note that Monetarist Fools Have Suggested -10%.

The fool in question is Professor economics professor Gregory Mankiw. I replied to his theoretical nonsense in Economist Mankiw Defends Policy of Theft.

.....
There is theory and there is practice.

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  #60  
Old 03-19-2016, 09:13 AM
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JAPAN

http://mishtalk.com/2016/03/18/alleg...ielding-bonds/

Quote:
Bond Shortage!

On Friday, yield on Japanese 10-year bonds hit a record low -0.135%. According to Bloomberg, the chief strategist of Bank of America Merrill Lynch in Tokyo stated those 10-year bonds look “relatively cheap”.

Supposedly they are relatively cheap compared to “other tenors”. I presume he means 20-year securities yielding a record low 0.29%.

Meanwhile, the head of fixed-income investment at PineBridge Investments Japan offered this amazing tidbit: Investors are buying shorter-dated debt “as there aren’t enough 30-year, 20-year bonds available.”


Bond Shortage Proposal

Mercy me! There’s an outright shortage of 20 and 30-year Japanese bonds. Japan better float 20 quadrillion Yen worth of them pronto.

If that sounds absurd, then please consider additional details from the Bloomberg report Japan 10-Year Yield Drops to Record, Below Negative Deposit Rate.

.....
One Quadrillion Coming Up

There’s a mere 600 trillion yen ($5.4 trillion) in negative-yield Japanese bonds. I say “mere” because of the clear shortage.

One quadrillion is 1,000 trillion.

Since there are already 600 trillion yen worth of negative-yielding bonds in the alleged shortage, my preposterous-sounding 20 quadrillion proposal could eventually happen.

At the current pace, we will easily see our first quadrillion in negative yielding bonds by the end of the year. Why not 19 more?

Does this report, and the quotes in it, sound more like it’s from The Onion or the Twilight Zone?

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