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2016-02-13

Feds Keynes policy of QE and ZIRP does not work any more, Stockman 11/2

Both of these effects are aimed at inducing businesses and households to borrow more than they would otherwise, and to then spend more than they produce.

But now those household and business balance sheets are all used up because we are at Peak Debt, along with most of the rest of the world.


The stimulative effect of low and ultra-low interest rates never really leaves the canyons of Wall Street. And when it does, it trickles its way into credit extensions to the weakest borrowers left in the land. That is, students and subprime auto borrowers. 




http://davidstockmanscontracorner.com/simple-janet-the-monetary-android-with-a-broken-flash-drive/

2016-02-12

Buybacks are a tool used to artificially inflate bottom line earnings






“The reality is that stock buybacks are a tool used to artificially inflate bottom line earnings per share which, ultimately, drives share prices higher.



In all, the massive speculation unleashed in the equity markets since the March 2009 bottom has caused more than $5 trillion of current cash flow and new debt to be allocated to corporate stock buybacks, M&A deals and LBOs. 



2016-02-10

Carl Bildt och andra föraktar väljarna. Det förklarar framgångarna för Trump, Sanders m fl


Jag har alltid trott att New Hampshire var ett hyfsat anständigt litet ställe. Nu på morgonen ser det ut att vara spritt språngande galet”, skriver Bildt.

Donald Trump, Marine Le Pen, Nigel Farage
The economic losers are in revolt against the elites
Martin Wolf January 26, 2016

The six founding members of the European Union are “concerned about the state of the European project” but committed to ever closer union

The six founding members of the European Union are “concerned about the state of the European project” but committed to ever closer union

http://www.politico.eu/article/core-europe-committed-to-more-europe/

Federalism at IntCom

Janerik Larsson: Sanders dröm är det forna Sovjet eller Östeuropa

Det som många påpekat är att tonläget satts av de mest extrema högerpopulisterna, Donald Trump och Ted Cruz, samt av den lika extrema vänsterpopulisten Bernie Sanders.
Gemensamt för dessa är en framtidsbild som i Trumps och Cruz’ fall handlar om en närmast absurd dröm om att återskapa 1950-talets USA och i Sanders’ fall snarast är det forna Sovjet eller Östeuropa vid ungefär samma tid.

2016-02-09

The financialisation of home ownership

At one point, rising home ownership solved many of the problems identified the 1960s. 
The predictably steady rise in house prices over time, like predictable inflation, created an escalator for the working class. 
If you combined that with vigorous social housebuilding, as practised by both Labour and Conservative councils in the 1970s, you created affordability at both ends of the scale.
If you then dramatically slash the supply of social housing, through right-to-buy and reduced council building, you create a permanent imbalance that turns home ownership into a form of asset investment.

These Are the Things That Correlate With the Fed's 'Easy Money' - All about that (monetary) base.

Faced with the most severe economic downturn since the Great Depression, the U.S. Federal Reserve did the only thing it could: flood the financial system with liquidity.

The move to so-called easy money arguably saved the world from a worse fate and radically changed the economic backdrop as well as the landscape for financial markets.

Bloomberg 9 Febr 2016

Treasury Secretary Henry Paulson of Goldman Sachs

Financial Crisis at IntCom

Ben Bernanke at IntCom

Dagen kan bli intressant Här läget 9 febr 14.00


China's own version of 'The Big Short'

This column has examined China's $28 trillion problem, which relates to its post-Lehman Brothers credit explosion. 

A more immediate one is the roughly $23 billion of offshore debt rated just one small step away from junk by major credit-rating companies.

By William Pesek Published: Feb 3, 2016


Michael Lewis, author of "Liar’s Poker," "The Big Short" and "The Blind Side,"
CNBC 1 Feb 2011

Finanskrisen 2007 - at IntCom

What the ‘Chart of Doom’ is saying about a global recession, Chang

The Chart of Doom shows credit dropping off in the U.K., Japan, and the eurozone while remaining expansionary in the U.S. and China. 

“Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff,” wrote Smith in a post on his blog ‘Of Two Minds.’

Seneca Cliff is a reference to Lucius Annaeus Seneca, a Roman philosopher who is credited with saying: “As it is, increases are of sluggish growth, but the way to ruin is rapid.”

Sue Chang, MarketWatch Feb 8, 2016

Doom at IntCom

Next time there's a crisis, the big banks should be allowed to fail, Lynn

If they don’t pay for their mistakes, then there is no incentive not to keep repeating them.

The key index of European bank stocks has lost almost a third of its value in only a few weeks.

Everyone thinks record low rates are there to help banks, but actually they have been hurt most of all. 

On top of that, there are now negative rates across much of Europe, so the cash on their balance sheets is actually costing them money. 


Matthew Lynn, Telegraph 8 Feb 2016

Moral Hazard at IntCom



Economists will no doubt be debating the effectiveness of QE for a couple of generations at least. 

2016-02-08

Deutsche Bank Co-Co bond yields hit 12%.

Two-year German government bonds now yield -0.50%.

MishTalk, Febr 8. 2016

Why coco bonds are worrying investors 
FT February 9, 2016



marketwatch.com/story/what-are-cocos-and-why-is-everyone-freaking-out-about-them-2016-02-09



Conduits or structured investment vehicles (SIVs), 
Credit-default swaps, Monolines and Disintermediation
at IntCom


The Bank of Canada admits easy money can inflate debt bubbles

Stocks Retreat Worldwide

The distinction is clear between helicopter money and quantitative easing



QE easing by the Federal Reserve and the world’s other major central banks spawns asset price inflation and excessive risk taking. 

In turn, that sets up the stage for sharp asset price corrections when central banks start trying to normalise monetary policy, which has the real potential to deal a body blow to the global economy.

By contrast, helicopter money of the variety proposed by Milton Friedman some three decades ago does not involve central bank asset purchases

Desmond Lachman
American Enterprise Institute,


“structural reforms”

Today’s politicians and central bankers are fixated with fiscal targets and debt reduction. As in the early 1930s, policy orthodoxy has pathological qualities. 

Whenever they run out of things to say, today’s central bankers refer to “structural reforms”, although they never say what precisely such reforms would achieve. 

Wolfgang Münchau, FT 7 February 2016

- Visst beror dagens problem i ekonomin i någon mån på missgrepp i slutet av 80-talet och början av 90-talet. Men i grunden har Sverige inte hamnat i en stabiliseringspolitisk kris.

Underskottet i statsbudgeten beror djupare sett på att vi försöker överbrygga en konjunkturnedgång när det i själva verket handlar om en grundläggande strukturell förändring.

Mats Svegfors, Sv D 1994-09-10

2016-02-07

Skall Riksbanken göra det igen? Intervenera på valutamarknaden?

– Räntan är negativ och det får fruktansvärda effekter på andra saker, som stigande bostadspriser anser Professor Annika Alexius,

Till sommaren väntas Riksbanken ha köpt en tredjedel av alla svenska statsobligationer till ett värde av 200 miljarder kronor. Köpen har skett till rekordlåga räntor. När räntorna en dag stiger blir obligationerna mindre värda.

Jag skulle nog börja med valutainterventioner. Men om man ska få upp inflationen via kronkursen måste kronan försvagas ordentligt, det räcker inte att bara hindra den från att stärkas, säger Annika Alexius.

Vice riksbankschef Martin Flodén har reserverat sig och varnat för att det skulle kunna komma att krävas "omfattande interventioner under en lång tid för att få en tydlig effekt på växelkursen" och att "det skulle medföra betydande risker för Riksbankens balansräkning och eget kapital".

http://www.svd.se/professor-riksbanken-agerar-dumt-och-verktygsladan-ar-tom

Riksbankscheferna har tagit steg för steg för att förbereda för valutainterventioner. Så sent som i början av året ordnades de sista detaljerna. Kanske kliar det lite i fingrarna att testa valutavapnet och se vad det går för.




Utlandslånen hotar de svenska bankerna





Större bild

Diagrammet är hämtat ur
Krasch, boom, krasch? Den svenska kreditcykeln
Lars Jonung och Fredrik N G Andersson

Stefan Ingves och Englunds varningsord

2015-11-19


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