Tag Archives: Central Banks

In the long run, as someone once said, we are all dead, but in the meantime, as BofAML’s Michael Hartnett provides a stunning tour de force of the last 5000 years illustrates long-run trends in the return, volatility, valuation & ownership of financial assets, interest rates & bond yields, economic growth, inflation & debt… The Longest Pictures reveals the astonishing history investors are living through...

Muhammad Ali Could Take a Punch BALTIMORE – You had to admit. Muhammad Ali could take a punch. Unlike Donald Trump, Dick Cheney, George W. Bush, and Bill Clinton, he was a real war hero. He stood up and faced his enemies on the draft board, rather than dodging them. And when the feds walloped him as a criminal draft resister, Ali didn’t throw in the towel in a whimpering surrender to superior force. Instead, he used...

  Stuffing the Futon Our friend Ramsey Su just asked what Haruhiko Kuroda and Shinzo Abe are going to do now in light of the strong yen (aside from perhaps doing the honorable thing). Isn’t it time to just “wipe out some debt with the stroke of a pen”? We will return to that question further below, but first a few words on the new Samurai futon. Apparently the Japanese are becoming more than a little antsy about Kuroda-san’s negative interest rate policy (and the threats of more of the...

  Seven Year Achievement “Read the directions and directly you will be directed in the right direction.” — Lewis Carroll U.S. consumers are at it again.  After a seven year hiatus they’re once again doing what they do best.  They’re buying stuff. PCE: personal consumption expenditures up 1% According to the Commerce Department, personal consumption expenditures (PCE), which is the primary measure of consumer spending on goods and services in the U.S. economy, increased $119.2 billion in...

 ECB press conference June 2 2016 Held in Vienna with Governor Nowotny Keep key ECB interest rates unchanged Will be kept at present or lower for an extended period of time, exceeding asset purchase program (80bn per month) which will end March 2017 sector program will start June 8 TLTRO start in June New measures will strengthen growth in euro area through credit expansion Very low inflation must not become entrenched in second round effects through effects on wages and prices. ECB...

  An Alert for the Global Posse of Liquidity Junkies In the summer of 2015 and again in December-February this year, global stock markets were rattled by weakness in the yuan’s exchange rate vs. the US dollar. Yuan weakness is widely held to exacerbate pressures on other (already weak) emerging market currencies, but more importantly, it is seen as a symptom of accelerating capital flight from China. USD-CNY, daily; onshore yuan rate USD-CNY, daily (a rising price denotes yuan weakness)...

Despite US equity investors’ exuberance over bouncing crude oil prices, the world’s crude producers continue to suffer and while Venezuela is in the headlines every day (having already collapsed into chaos), Nigeria appears the nearest to that abyss next. Having urged investors “don’t panic” last year, and seeing dollar reserves drying up rapidly earlier this year, recent “lies” about the nation’s statistics have raised fears of a looming devaluation as FX forwards have crashed to 291...

We have argued the inevitability of Fed-administered hyperinflation, prompted by a global slowdown and its negative impact on the ability to service and repay systemic debt. One of the most politically expedient avenues policy makers could take would be to inflate the debt away in real terms through coordinated currency devaluations against gold, the only monetize-able asset on most central bank balance sheets. To do so they would create new base money with which to purchase gold at...

Submitted by Patrick Watson via MauldinEconomics.com, Central bankers use low or negative interest rates so that it leads to more investment. For them interest rates are a consequence of the currently very low inflation rates. Patrick Watson argues in the exactly opposite way: Falling prices are a consequence of low interest rates and not the opposite: We see two reasons why this can be true: High, maybe excessive investment is happening in China (alas not in Europe). Cheap costs of...

In the 1970s economists started to incorporate rational expectations into their models and not long after the seminal Kydand & Prescott (1977) article named Rules Rather than Discretion: The Inconsistency of Optimal Plan was published. Their work has been driving the mainstream macroeconomic debate ever since. The question raised in this debate is how policy-makers can credible commit to promises made today when future events may cause short-term pain if restricted by stringent rules...