"Was quantitative easing best way to boost US economy?" by Kenneth Rogoff March 01, 2015
Well, it's a little late to be asking now, isn't it?
I suppose the answer is yes -- if you wanted to inflate the stock market and pour wealth into the pockets of the 1%.
Kenneth Rogoff is a professor of economics at Harvard University.
In the years since the financial crisis, the central banks of most advanced countries have been trying to restore growth by pumping money into their economies and buying up government debt and other assets, a process known as quantitative easing.
The scale of the interventions has been eye-popping: The balance sheet of the US Federal Reserve Bank has ballooned from around $700 billion at the outset of the financial crisis to peak at more than $4 trillion. So far, this massive “money printing” has not led to inflation because bank lending has not grown proportionately.
Nevertheless, some worry there will be big effects as the economy normalizes; others worry that “QE” has distorted the prices of stocks and other assets, creating a giant bubble waiting to pop, perhaps leading to another deep recession.
These concerns are probably overblown, although quantitative easing is still an experimental policy and there are many unknowns.
Yeah, right. It's what they have always done, either increased or contracted the money supply, but don't let that spoil the banker's narrative.
I mean this whole idea that they don't really know anything or what they are doing, but believe in what these so-called experts say, is ridiculou$.
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Of course, to the extent the central bank is simply buying government debt, these losses have little economic meaning. The government — the supplier of the debt — happens to own the central bank — the holder of the debt.
That right there is a lie. The Federal Reserve is a conglomeration of private banks and is not a part of the government at all. They print the money, then loan it at interest to the government so they can hand it out.
Indeed, this observation begs the question of why central banks have been stuck doing the heavy lifting, instead of, say, government treasuries just issuing shorter-term debt.
Yeah, the poor, workmanlike, long-suffering f***ing banks, yup.
Perhaps it is because in practice, central banks know they will get politically roasted for having paper losses, so stuffing their portfolios with low-yielding long-term debt helps convince investors they will keep short-term interest rates low for as long as possible. No one knows for sure.
Pffft!
We do know lower long-term interest rates stimulate growth. For example, low rates help induce firms to invest more and consumers to buy more on credit, raising demand for cars, computers, refrigerators, and of course, homes. Unfortunately, this normal channel has been less potent in the wake of the crisis, with many still skittish to invest. At the same time, tighter credit standards have cut off many lower-income consumers from borrowing entirely.
Nevertheless, low rates on long-term bonds have almost certainly helped bid up the prices of other assets such as stocks and housing. Some of this wealth gets spent, raising demand and inflation, and ultimately increasing jobs. This is something of a trickle-down effect because the wealthy obviously benefit disproportionately from rises in asset prices.
That's really rubbing salt in the wound as they pi$$ all over you.
Of course, central bankers are quick to point out that a large majority of people own homes and benefit from higher stock prices through their pension funds, 401(k) plans, insurance contracts, and the like. Still, to make it more even-handed, some central bankers might want to just print money and hand it out to lower-income individuals. But most central banks don’t have the right to do this; they can only intervene in financial markets, and only in a limited way. The job of redistributing income is for Congress and the president.
Why doesn’t the government just finance its entire debt at zero interest? Wouldn’t that free up public funds for other uses and save the taxpayers a lot of money? Yes, but here’s the rub: This is not a likely scenario but because a country like the United States intends to be in business for many centuries to come, it is not one to be totally dismissed — in my mind, QE was worth taking the added risk.
The rub is what he proposed is exactly what the Constitution called for, and it would mean the end of the Federal Reserve. That's the "rub."
A couple of presidents have tried to move us away from the banks and in that direction. Thinking of Lincoln and Kennedy in particular, but other presidents have also been assassinated when they stood up to the bankers.
Btw, the same thing was done by another fella -- and we all know how he has been treated by the propaganda pre$$ and those that control the narrative of hi$tory.
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The central banks are almost certainly right in theory, though one can imagine practical circumstances where exiting from QE could get tricky.
Oh, it's all a "theory" now, huh?
Obviously, central banks can simply reverse the process as the global economy strengthens, selling off long-term bonds to soak up reserves. Then that money doesn’t get into the economy to cause inflation.
And if all else fails, the central bank does have other tricks up its sleeve. For example, the Fed might be able to invoke financial stability concerns to force banks to temporarily hold much higher reserves. Such a move would be hugely controversial, but in emergency situations, central banks are used to that.
This is gro$$ eliti$m, folks, and were I a member of the cla$$ for whom the Globe is written of and for I would be very much enjoying this.
Is there a better idea than quantitative easing? For example, if bank reserves are being bottled up and not getting out into the economy, why make the interest rate paid to banks negative, pressing them to lend out the funds?
See: Why negative interest rates have arrived—and why they won’t save the global economy
But they will allow the bankers to steal your savings -- all to save the economy from.... themselves!
The main problem, perhaps surprisingly, is that central bankers fear that pushing policy interest rates too deeply into negative territory will set off a run into paper currency, which pays no interest. This creates all sorts of problems, but mainly the paper currency option effectively prevents rates from getting too negative.
Why would bankers fear anything when I was told above they are tough and used to such things?
The Swiss National Bank has recently decided to test the limits of negative rates by pushing its central rate down to -0.5 percent. The Danish Central Bank went further, pushing short term interest rates to -.75 percent. The Swiss and the Danes probably figure if they don’t push it too far, there won’t be a flight to currency on a grand scale that would undermine their policies. After all, holding large piles of cash has its own risks, including theft. Still, it is a real question how much further central banks could dip into negative interest rate territory without creating massive problems.
This guy is really a piece of work, isn't he?
The bank withdrawals that always occur when people find out about the banksters helping themselves to your savings undermines the policy and could create massive problems. But it likely won't happen. This from the people who never saw the collapse of the world economy due to Wall Street fraud.
There are ideas out there for making it easier for central banks to charge negative interest rates in a deep recession, albeit slightly futuristic. The simplest idea is to phase into a new world where the central bank issues traditional currency electronically instead of by paper.
Like the allegedly failed bitcoin?
This would be a complex transition involving many institutional changes, particularly to allow privacy in smaller transactions and to subsidize credit services for lower-income individuals.
Phasing out large-denomination notes might prove to be sufficient — roughly 80 percent of US paper currency is $100 bills. With only electronic currency, there would be no constraints on paying interest on money.
(Bankers smile)
In normal times, interest rates could be positive; in a deep recession, interest rates on currency could be negative.
The wealthy already benefit from recession by buying dear, and now more money will be taken from the rest of us when we most need it to subsidize them some more.
Whatta country!
But obviously this kind of institutional change, even if inevitable, cannot be implemented anytime soon. So the zero bound is a real problem.
Oh. So he just let you know where they are going.
This Ponzi pyramid scheme they call an economy can not collapse fast enough.
Bottom line benefit
It does appear that QE has, in the end, been at least a modest success — particularly in the United States and the United Kingdom, two countries that were early adopters of QE and today are doing better than most.
Why am I not $urpri$ed he feels that way?
But policymakers or economic pundits who absolutely assure you that there is no risk are engaging in hyperbole. We don’t know the endgame, including risks from asset bubbles that might pop violently at some point, or from budget problems if global interest rates unexpectedly tighten quickly.
But.... ????
My guess is that history will judge quantitative easing a reasonable risk where there was no complete safe path to recovery. Still, let’s hope that before the next financial crisis happens, hopefully in the distant future, central banks will have found a better approach.
What "next crisis?" I was told Dodd-Frank fixed all that! Now we are counting on hope?
Btw, my guess(!) is that history will not judge kindly the behavior of the money junkies; they never have, and the way the world is today, history is making its judgement now, right here!
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Maybe Europe will be able to answer the question:
"European Central Bank to start stimulus plan" by Jack Ewing, New York Times March 06, 2015
NICOSIA, Cyprus — The European Central Bank will begin its big new stimulus program on Monday, the bank’s president, Mario Draghi, said as he predicted improvements in the economy and in the eurozone’s inflation picture as a result of the effort.
The starting date, announced Thursday, was one of many details the financial markets had been awaiting since the central bank said in January that it would embark on a program of large-scale asset purchases — a so-called quantitative easing effort intended to fix the collapse in consumer prices.
In Cyprus, Draghi appeared unruffled by recent political turmoil in the eurozone provoked by a change in government in Greece. Instead, he offered one of his most optimistic assessments in months of the eurozone economy and gave the central bank much of the credit.
Related: A New World Power
“Our monetary policy decisions have worked,” Draghi said. “It’s with some certain degree of satisfaction that the governing council has acknowledged this.”
The ab$olute arrogance that oozes from these guys is sickening.
Underpinning his optimism, economists at the central bank raised their forecast for growth this year.
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Draghi’s suddenly sunny forecast could have been calculated.
What, it's just public relations propaganda and bull$hit coming from the central bank?
The central bank’s policies will be more effective if investors, corporate executives, and consumers believe in them.
OMG!
Supported by positive economic data, like a decline in unemployment, Draghi appeared to be giving a pep talk that would encourage more investment and spending. Bond buying is a way for the European Central Bank to effectively print money and inject it into the economy.
Thus lower the very value of that currency and raising the prices of things that will in turn bring calls for austerity cuts from these very same bankers who will be having money poured in their pockets.
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Also see: End of the Euro?
It's worse than SILLI, if you know what I mean.
"China cutting rates again to aid economy" by David Barboza, New York Times March 01, 2015
SHANGHAI — With its growth engine slowing, China said Saturday that it was reducing the nation’s benchmark interest rates for the second time in three months.
In an announcement on its website, China’s central bank said, effective Sunday, the one-year bank lending rate would drop 0.25 percentage points to 5.35 percent, and deposit rates would also drop by 0.25 percentage points.
The move, which makes it cheaper to borrow money, comes as policymakers seek ways to stimulate the economy while promoting overhauls aimed at giving market forces a greater role in the country’s development.
China already has the world’s second-largest economy after the United States. And during much of last year, it was expanding about 7.5 percent. But late in the year, momentum slowed considerably, raising concerns that growth targets would not be met and that a deeper downturn was possible.
In the fourth quarter, growth dipped to 7.3 percent, the slowest rate in more than two decades. And in January, China’s consumer price index rose just 0.8 percent, its weakest showing since late 2009.
Economists are pressing the People’s Bank of China to ease its monetary policy in the hope of bolstering growth.
Through much of last year, the government seemed to resist calls for economic stimulus packages and monetary easing out of fear that they might lead to a repeat of 2009, when a vast stimulus effort boosted growth but also led to soaring debt for corporations and local governments.
??????
But a sluggish property market and signs of deflationary pressure have become urgent concerns in a country that has benefited from nearly two decades of spectacular growth, analysts say.
The government has tried to make it easier for small businesses to obtain loans and has allowed China’s currency to weaken against the dollar, aiding exporters.
In November, for the first time in two years, the government reduced interest rates.
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Maybe there isn't enough corruption in the economy.
At least tourism and lobster purchases are not suffering.
Will I be posting anymore today? What do you think?
NDUs:
"Eurozone prices continue to fall" by David Jolly, New York Times March 03, 2015
PARIS — Europe experienced a third straight month of falling prices in February, adding to worries about possible deflation, official data showed Monday, but the jobless rate ticked down to the lowest level since 2012, providing a welcome glimmer of hope that the economy might be picking up steam at last.
How many times do we have to see the bull$hit?
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The evidence of deflation — a prolonged period of outright declines in prices and wages that can create a debilitating economic cycle that is hard to break — gives further urgency to a new initiative by the European Central Bank aimed in part at arresting the downward price spiral before it becomes a tailspin.
That's when you reach for your wallet.
Under the central bank’s new policy, known as quantitative easing, it is expected this month to begin buying up to $67 billion of bonds on the open market....
The downturn in oil prices has contributed to the deflationary pressures.
I was told that was a good thing, those gas prices coming down. Hasn't seemed to help, but.... that's what the propaganda pre$$ told me.
Many economists see lower energy prices as an unalloyed good for the economy because they put more discretionary income into consumers’ pockets.
$ee?
But oil prices are only part of the story....
(Again reaching for wallet)
“It’s like a tax cut,” Jacques Cailloux, chief European economist at Nomura in London, said of lower oil prices. While the impact is positive, he said, the benefit will probably last only a few months before fading.
Unle$$ they need be renewed every year by the U.S. Congre$$. Then they are in perpetuity.
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