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The primary purpose of doing QE is — or should be — to expand purchasing power. FT Greenwood

If the central bank buys securities from banks, there can be no assurance that the money supply will increase.

However, if it buys securities from non-banks, this guarantees that new deposits will be created, expanding the money supply.

Of course, if firms or households are deleveraging — repaying debt — the central bank may need to conduct even larger scale asset purchases to counter any reduction of deposits due to the debt repayments.

John Greenwood, FT 30 May 2016

The writer is chief economist at Invesco and a member of the BoE’s shadow Monetary Policy Committee


During the year through June 2015, an amount equivalent to more than 40 percent of Greece's annual economic output fled the country. Bloomberg

Not much private money, though, has come back since then -- reflecting both the effect of capital controls and persistent concerns about whether Greece will remain in the euro area.

Here's a chart showing the three-month cumulative flow of capital between Greece and the rest of the euro area (negative numbers indicate outflows):

Mark Whitehouse, Bloomberg Opinion 3,0 May 2016

As a biographer and aficionado of John Maynard Keynes, I am sometimes asked: “What would Keynes think about negative interest rates?” Skidelsky

Keynes’s General Theory in which he notes that if the government can’t think of anything more sensible to do to cure unemployment (say, building houses), burying bottles filled with bank notes and digging them up again would be better than nothing.

He probably would have said the same about negative interest rates:
a desperate measure by governments that can think of nothing else to do.

Robert Skidelsky, Project Syndicate 24 May 2016

Keynes on IntCom

The /IMF-EU/deal requires finance ministers to come clean before the end of this year on what debt relief measures they intend to propose. Münchau

In a significant concession the International Monetary Fund accepted that an agreement on debt relief for Athens is postponed for another two years. 

But the deal  requires finance ministers to come clean before the end of this year on what debt relief measures they intend to propose. 

The numbers will have to add up — an unheard of event in eurozone crisis resolution politics. 

There is enormous pressure on eurozone officials to deliver a set of figures that the IMF can accept.


Here's Why All Pension Funds Are Doomed, Doomed, Doomed. Charles Hugh Smith

It's no secret that virtually every pension fund is dead man walking, doomed by central banks' imposition of low yields on safe investments, i.e. Zero Interest Rate Policy (ZIRP).
Given that both The Economist and The Wall Street Journal have covered the impossibility of pension funds achieving their expected returns, this reality cannot be a surprise to anyone in a leadership role.


Martin Wolf: Monetary policy is not exhausted, and active use of it is essential. But undue reliance on monetary policy is problematic.

Extreme monetary policy can have unintended consequences

First, if inflation is zero or, still worse, if it turns negative, it becomes harder to secure needed changes in relative prices and wages. The obstacle here is nominal wage rigidity. This difficulty is particularly important in a multi-country currency union, such as the eurozone.

Second, under deflation negative real interest rates are possible only with strongly negative nominal interest rates. Without negative real interest rates, countries might end up in a prolonged period of deficient demand, elevated unemployment and weak investment.

Third, under deflation the real burden implied by a given level of nominal debt spirals upwards. This risks creating “debt deflation”, a condition explained by the US economist, Irving Fisher, in the 1930s. 

 Mario Draghi: low interest rates are the symptom of an underlying problem, which is insufficient investment demand, across the world, to absorb all the savings available in the economy.

The question is how well monetary policy can remedy such a chronical deficient in demand. 

Do negative rates, for example, increase confidence by showing that central banks are not out of ammunition, or damage it by proving how bad the illness is?

Perhaps the biggest concern is that extreme monetary policy risks distorting asset prices and generating new financial bubbles.

If the fundamental difficulty is an excess of savings over investment, fiscal policy would be a better targeted remedy. 

Fiscal policy should play a far bigger part in demand management.

Martin Wolf, FT 25 May 2016

- Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.

Det skrev jag på min blogg första gången den 5 december 2009.

Nu skriver jag det igen.


Lars EO Svensson : Ett fall i bostadspriserna på 10-20 procent skulle inte vara ett problem

Riksbanken har också förberett sig för att agera direkt på valutamarknaden och sälja svenska kronor för att få upp inflationen. Valutainterventioner är omdebatterade och många bedömare anser att det vore fel väg att gå. Men Lars EO Svensson ger även här Riksbanken stöd.

– ​Såvitt jag kan se tillåter svensk lagstiftning valutainterventioner och att​ Riksbanken ha​r​ ett tillfälligt växelkursgolv i syfte att uppnå de penningpolitiska målen. Det är inte en fråga om att byta växelkursregim.

Louise Andrén Meiton, SvD 23 maj 2016

Lars EO Svensson

Ovanlig laguppställning: 

Basel-banken och Englund, mot Krugman och Lars EO Svensson


Germany are trapped in the lie that Greece is solvent, which is what their own backbenchers were told. Münchau

But the lie cannot be sustained.
IMF insistence on debt relief is what could expose this lie.

Wolfgang Münchau, FT 22 May 2016

Alarm bells ring over negative interest rates FT

 says Fitch. “In any case, the risk of unintended consequences does appear to be rising as banks, consumers and businesses adapt to a more uncertain economic environment in which negative interest rates are increasingly common.”

Stanley Druckenmiller, the former hedge fund manager said Fed policymakers are “raising the odds of the economic tail risk they are trying to avoid”, such as spurring credit bubbles, by keeping interest rates near historic lows.

Mr Druckenmiller added that the “longest period ever of easy monetary policies” has caused groups to borrow at a quick clip and then use the funds in ways that are not economically productive. For instance, he noted that “most of the debt today has been used for financial engineering”, in the form of stock buybacks and other methods that provide a boon to corporate profits 

MAY 5, 2016


The International Monetary Fund’s latest recommendations on Greek debt relief have leaked. FT Alphaville

Yesterday, ahead of the latest meeting of eurozone finance ministers on May 24, the IMF repeated it would take part in Greece’s €86bn bailout only if its European partners could prove “the numbers add up”.

Without any debt relief measures at all, the IMF’s analysis calculates Greece’s debt pile will soar to 294 per cent of GDP in 2060.

By Mehreen Khan in London, 20 May 2016


Fighting the Next Global Financial Crisis The latest progress reports from the Financial Stability Board (FSB) in Basel Robert J. Shiller

The day after the Lehman Brothers bankruptcy was announced, a major United States money market fund, Reserve Primary Fund, which had invested in Lehman debt, was in serious trouble. 

With assets totaling less than it owed to investors, the fund seemed to be on the verge of a run. 

As panic rose among the public, the federal government, fearing a major run on other money market funds, guaranteed all such funds for one year, starting September 19, 2008.

Project Syndicate 18 May 2016

Lehman Brothers


On the Question of the Guilt of the New Left, Revolutionary Sectarianism, and the Silence of the Renegades. Tallmo

The radicalism of the 60's was at the beginning a rather playful phenomenon, there were music festivals and hippies and love-ins. But more dogmatic movements emerged, following the teachings of Lenin, Mao Zedong, Che Guevara, and Stalin or Trotsky.  

Suddenly there were lots of young idealistic people claiming to love freedom and justice, and in the same breath they defended the purges of Stalin, justified the murders during the cultural revolution in China, and advocated violent measures towards their own country's military and capital owners.

Karl-Erik Tallmo

- Värst tyckte jag om Anders Ehnmark, som framträdde som salongskommunist och skrev i Veckojournalen, eller om det var Månadsjournalen, eller båda.


mainly macro: A General Theory of Austerity

mainly macro: A General Theory of Austerity: “If we cannot puncture some of the mythology around austerity … then we are doomed to keep on making more and more mistakes” Barack ...


As I detailed in my recent book, "The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse," El-Erian

Reconciling 3 Narratives About Global Growth

"new normal," "new mediocre" and "secular stagnation." 

The second view involves questions about the continued effectiveness of central banks. 

Financial market overshoots driven mainly by changing sentiment about China's ability to bring its economy to a soft landing, and evidence that the U.S. continues to heal. 

Dagens Nyheter, kronkursförsvaret och "eftervården"

Under hösten 1985 övertygades finansminister Kjell-Olof Feldt (S) om att tiden var mogen för myndigheterna att slopa utlåningsrestriktionerna inom det svenska banksystemet. I november samma år fick Riksbanken grönt ljus. Krediterna släpptes fria och en stor uppdämd hunger på lån kunde plötsligt stillas.

Den nödvändiga eftervården av avregleringen uteblev dock. 

Och några år senare hade Sverige en jättelik fastighetskrasch och en bankkris på halsen.

DN-ledare 15 maj 2016

Talet om eftervården är trams.
Den enda eftervård som skulle ha fungerat hade varit att låta kronan flyta.

Men det vill inte DN erkänna ens nu. Det skulle ju betyda att de erkände att de hade fel då, om kronkursförsvaret, och fel senare och nu, om EMU. 
Euron är ju den ultimata fasta växelkursen, tänkt att vara för evigt.

- Centralbanken kan styra en av tre variabler: inflationstakt, ränta, eller växelkurs - men endast en av dessa tre.

Nils-Eric Sandberg i DN 2000-04-28

Detta har NES med sin sedvanliga envishet upprepat i decennier. Men Feldt, Bildt & Co. verkar inte ha lyssnat. Därav det lika tappra som misslyckade kronförsvaret. Därav den svenska ekonomins uppgång och fall.

DN borde i alla fall vara lika kunnig som Ingvar Carlsson.

Ingvar Carlsson om kronkursförsvaret 1992:

- I efterhand står det klart vad läget egentligen krävde. Det fanns en snabb och effektiv åtgärd som i tid hade kunnat få läget under kontroll. Jag anser att den fasta växelkursen borde ha släppts och följts av en kraftig räntehöjning.

Källa: Ingvar Carlsson, Så tänkte jag Hjalmarsson & Högberg 2003

1985 avreglerade Feldt finansmarknaden
Det misstag vi gjorde var att inte släppa valutan samtidigt 
Vi trodde dessutom att bankerna skulle vara redo för att leva i en fri marknadsmiljö, men det var de inte
Kjell-Olof Feldt intervjuad om sin nya bok "En kritisk betraktelse av social­demokratins seger och kris", Albert Bonniers förlag
Dagens Industri 21 april 2012


Noahpinion: Review: Ben Bernanke's "The Courage to Act"

Noahpinion: Review: Ben Bernanke's "The Courage to Act": I wrote a review of Ben Bernanke's book, The Courage to Act , for the Council on Foreign Relations. Here's an excerpt: Basica...

The fundamental cause is that the Greek government can’t raise money from the private sector at reasonable rates. Why? Matthew C Klein

According to the latest figures from the International Monetary Fund, the Greek government owes almost 180 per cent of the country’s yearly output and this debt is denominated in a currency the Greek government can’t print.

Creditors rarely get all their money back in those sorts of situations, so they’re demanding high interest rates to compensate for the risk of large losses.

Many borrowers, especially governments and businesses, rarely expect to repay all their debt at once when it comes due, instead preferring to roll over maturing debts into new ones. 

This isn’t usually a problem, since investors generally want to own some fixed income and would whine about asset shortages if all debts were repaid, but it makes these borrowers vulnerable to changes in investor opinion. 

Why do the frogs of Wall Street stay in the boiling pot? Stockman. Och Englund om de borgerliga grodorna som inte är lustiga att se.

Some do because they are perma-frogs. Not having been boiled for 7 years, they have apparently forgotten the pain.

The frogs of Wall Street, of course, have no clue. Even as the water temperature rises to the boiling point, you can still hear them declaiming that the crude oil bottom is in and that commodities and the materials sector is on the mend. Load up on some Exxon and BHP!

Needless to say, the global deflation is just getting started and the US economy has not decoupled from the world in the slightest—even if Donald Trump wants to make it so.

De borgerliga grodorna är inte lustiga att se

LO:s båda ledande ideologer i löntagarfondsfrågan, Per-Olof Edin och Anna Hedborg, skrev i sin bok "Det nya Uppdraget"(Tiden, 1980) följande idag mycket tänkvärda ord:

"En kinesisk lärare, som ville förklara begreppet anpassning för sina elever, tog en groda och lade den i kallt vatten. Grodan simmade glatt omkring. Så lade han grodan i varmt vatten i stället, men då hoppade grodan ur. Men sedan gjorde han på ett annat sätt: han lade grodan i kallt vatten, satte kärlet på elden och värmde upp vattnet. Grodan stannade kvar i vattnet och blev kokt..."

Till skillnad från "finansvalparna" har Edin och Hedborg och andra socialister ett tidsperspektiv som är längre än 48 timmar. Det gör att många borgerligt sinnade personer, särskilt om de har aktier och villor som har stigit kraftigt i värde, glatt simmar omkring i ett vatten som blir allt varmare.

Ändå finns det väl synliga termometrar som visar att vattnet blir allt varmare.

- Med fonderna tar vi över successivt. Det skrev LO-Tidningen ...


Donald Trump Is Right: Deficits Don’t Matter. Sounds a lot like Modern Monetary Theory (MMT), New Republic

“Reagan proved that deficits don’t matter,” Vice President Dick Cheney said when the Bush administration sought a second round of tax cuts in 2003. 

Trump later explained that he was merely referring to buying back existing debt at a discount if interest rates went higher, lowering the nominal value. 

This is something the U.S. does routinely. But Trump went further when he told CNN on Monday, “This is the United States government… you never have to default because you print the money.”

Trump’s statement sounds a lot like Modern Monetary Theory (MMT), a tenet of economists who believe in de-emphasizing the need for deficit reduction because the U.S. controls its own currency.

Balanced budgets, to MMTers, take money out of the hands of ordinary Americans who can put it to more productive use through job creation and consumer spending. 

The deficit only matters once you reach full employment, when overheated consumer demand can lead to inflation. 

But we’re nowhere near that point right now, meaning there’s plenty of room for deficits, without any possibility of default.

New Republic 11 May 2016

Trump, Englund och sedelpressarna

There is no chance of a "Lehman moment" in India. Raghuram Rajan, the governor of Reserve Bank of India

CNBC 13 May 2016

As Raghuram Rajan of the University of Chicago Booth School of Business and former chief economist of the International Monetary Fund notes in a thought-provoking new book, the underlying “fault lines” are still with us, Martin Wolf 2010

De näringslivstoppar som har riktat kritik mot minusräntan har inte satt sig in i frågan tillräckligt. Det säger riksbankschef Stefan Ingves

– Jag tror inte att det är så många som satt sig in i detaljerna när det gäller det här, säger han och tillägger att man måste acceptera att Sverige inte kan avvika från den allmänna räntenivån i världen.

SvD 13 maj 2016


Den höga privata skuldsättningen kombinerat med högt värderade och stigande fastighetspriser och en av världens största banksektorer gör att en framtida kris riskerar bli än värre än krisen under 1990-talet.

Sverige har under en längre tid byggt upp obalanser i ekonomin. Hushållens skuldkvot som andel av disponibelinkomst förväntas nå 190 procent 2018, en fördubbling sedan 1995. 

Problemen är kända. Riksbankschefen Ingves varnade 2014 för att om skulderna överstiger 180 procent av disponibel inkomst får vi det han kallade skulddominans, vilket betyder att den ekonomiska politiken helt måste inriktas på skuldproblemen. 

Trots denna insikt har Riksbanken infört negativ ränta vilket bidragit till att ökningstakten i både fastighetspriser och skulder har accelererat. 

Politikerna och Finansinspektionen har passivt sett på hur vi för varje dag kommer ett steg närmare en större finansiell krasch.

Deras artikel i Dagens Industri

Dagens glada nyhet
Svenska storbanker kan tvingas låna upp 588 miljarder kronor i efterställda lån, som ska kunna omvandlas till eget kapital i ett krisskede, enligt ratinginstitutet Moody's


Ordoliberalism - Germany is the eurozone’s biggest problem, Wolf

As Peter Bofinger, an heretical member of Germany’s council of economic experts argues, the tradition goes back to Walter Eucken, the influential father of postwar ordoliberalism.

In this approach, ideal macro­economics has three elements: a balanced budget at (almost) all times; price stability (with an asymmetric preference for deflation); and price flexibility.

This is a reasonable approach for a small, open economy. It is workable for a larger country, such as Germany, with highly competitive tradeable industries. But it cannot be generalised to a continental economy, such as the eurozone. 

What works for Germany cannot work for an economy three times as large and far more closed to external trade.

The Germans have a name for their unique economic framework: ordoliberalism


Svenska hushåll sparar mer än tyska, enligt Eurostat

Germans saved 16.9 per cent of their disposable income in 2014, making Germany the second-thriftiest country in the European Union after Sweden. 


Eurostats tabell finns här

Kan detta var sant?

Fotnot: Man får fram sparkvoten genom att gissa hushållens inkomster, sedan gissar man deras konsumtion och därefter dividerar man det ena med det andra.


Germany Blinks Under IMF Pressure: Greece Mish

In the wake of an IMF threat to back out of the Troika deal with Greece, Germany blinked under the IMF pressure.
Well, sort of.
The result was not quite the debt relief the IMF wanted, but it was more than Germany was prepared to offer yesterday.

Germany Draghi Rate Cuts Are Fueling a Housing Price Bubble

With record-low costs for mortgages and savings accounts earning almost nothing, Germany is warming to real estate investing. 

For decades, Germans showed a strong preference for living in rented apartments and stowing cash in the bank, but that tradition is fraying as the ECB keeps interest rates near zero. 

In the past five years, housing costs in Berlin, Hamburg and Munich have jumped by more than 30 percent, prompting official hand-wringing over rising prices.

 “And real estate agents are making the money of their lives.”

Brokers occupy increasingly posh offices in newly gentrified neighborhoods. 

Bloomberg 10 May 2016

Trump, Englund och sedelpressarna

People say I want to default on debt - these people are crazy.

First of all you never have to default because you print the money 

"If interest rates go up, we can buyback debt at a discount if we are liquid enough as a country. 

People say I want to default on debt - these people are crazy. First of all you never have to default because you print the money I hate to tell you, so there is never a default. 

It was reported in the NYT that I want to default on debt - you know I am the king of debt, I love debt, but debt is tricky and its dangerous. 

But let me just tell you: if interest rates go up and bonds go down, you can buy debt - that's what I'm talking about."

Englund 2011-11-04
Om man har en sedelpress går man inte i konkurs

Vi kan mycket väl bevittna världshistoriens största och kanske farligaste bubbla.
Räntorna är de lägsta på åtminstone 5 000 år. 
Detta betyder att priset på obligationer är de högsta på 5 000 år. 
Andreas Cervenka, SvD 27 januari 2016

US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Niall Ferguson, FT February 10 2010


Chief economist at Deutsche Bank: ECB Monetary policy has become the number one threat to the eurozone.

When reducing interest rates to historically low levels did not stimulate growth and inflation, the ECB embarked on a massive programme of purchasing eurozone sovereign debt.

But the sellers did not spend or invest the proceeds. Instead, they placed the money on deposit.

So the ECB went to the logical extreme: it imposed negative interest rates.  If this fails to stimulate growth and inflation, “helicopter money” will be next on the agenda. 

Future students of monetary policy will shake their heads in disbelief.

David Folkerts-Landau, FT 5 May 2016

Sir, David Folkerts-Landau argues that the European Central Bank has become part of the problem rather than part of the solution 

He makes some interesting arguments. Unfortunately, none of them has any foundation in economics.

When we start arguing that higher real interest rates would somehow prove expansionary — because people would feel more confident about the future — we really have gone down the rabbit hole

Richard Barwell , Steven Friedman, BNP Paribas Investment Partners, London EC2, UK


Albert Edwards: "Let Me Tell You How This All Ends"

The weak dollar, Edwards warns, should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves.

It ends with investors accepting that they can pretend no longer and profits are sliding into recession.

It ends as the equity market spirals into a deep bear market as company management reach the end of the road in the face of the recessionary conditions and 'kitchen sink' years of EPS manipulation.

It ends as corporate bond spreads explode as years of excess debt accumulation lead to widespread corporate bankruptcies, making the recession much deeper.

It ends with social unrest and double digit budget deficits (again).

It ends with investors losing faith with the Fed as the resumption of QE proves ineffective in reviving the economy.

It ends in deeply negative interest rates, currency and trade wars, helicopter money and ultimately inflation.

Via Zerohedge 8 May 2016

Berlin views the current account surplus simply as a reflection of Germany’s superior competitiveness. This is an economically illiterate view

If Germany had its own currency and a floating exchange rate, the current account imbalance would have mostly disappeared.

In theory, there is a simple solution. Berlin could cut taxes and raise investment spending. 

There is a lot of headroom. After years of austerity, the fiscal multiplier — the impact of each euro of deficit spending — is large.

Unfortunately, Germany’s balanced budget rule makes this impossible.

Wolfgang Münchau, FT 8 May 2016

Joschka Fischer and I agree on what the problems are with EU and EMU, but...

- EU leaders chose to let the reality of the various crises do the work for them, placing their faith in the force of circumstances.

But this approach, born of cowardice and misplaced cunning, had its price, too: 

To its citizens, an EU that moves only in crisis mode is the very image of incompetence, unworthy of their confidence – no longer the solution to the old continent’s problems, but simply another problem.

The financial crisis is anything but over; it has only taken on a new political guise. Portugal, Spain, and Ireland have shown that democratic majorities are no longer willing to endure the cure-or-kill treatment of austerity politics. And the Greek crisis is coming to a boil again.

The euro might not survive. 

Joschka Fischer, Project Syndicate, 3 May 2016

His conclusion is: 

"There is no reason for Europe to fear crises. They set things in motion and provide an opportunity for the EU to move forward and become stronger..."

My view is the quite opposite.

The March of Folly towards an Ever Closer Union and a New Roman Empire must be halted.

At least until there is a big and stable majority among the citizens concerned.


Christine Lagarde letter to Eurozone finance ministers demands: drop all the talk about new austerity measures and quickly agree a plan for debt relief

Drop all the talk about new austerity measures and quickly agree a plan for debt relief so that a deal can be met before a possible Greek default in July. 

Peter Spiegel, FT Alphaville 6 May 2016


Michael Lewis about Book by Mervyn King. “The End of Alchemy”

King’s starting point is that the 2008 crisis wasn’t an anomaly but the natural consequence of bad incentives that are still baked into money and banking -- and so quite likely to create another, possibly even greater, crisis.

“The strange thing,” he writes, “is that after arguably the biggest financial crisis in history nothing much has really changed in terms either of the fundamental structure of banking or the reliance on central banks to restore macroeconomic prosperity.” 

Michael Lewis, Bloomberg 5 May 2016 


ZIRP Consumers and businesses interpret such extreme policy as a sign of crisis with no predictable outcome.

Denmark has about $600 billion in pension and investment savings. The people who help oversee those funds say the logic of cheap money fueling investment doesn’t hold once rates drop below zero. 

That’s because consumers and businesses interpret such extreme policy as a sign of crisis with no predictable outcome.


Puerto Rico has $70bn of debts.

As a US territory, Puerto Rico cannot file for bankruptcy protection.



What ever happened to deleveraging? Spence

McKinsey notes that gross debt has increased about $60 trillion – or 75% of global GDP – since 2008. 

A global economy that is levering up, while unable to generate enough aggregate demand to achieve potential growth, is on a risky path.

Michael Spence, Project Syndicate 27 April 2016

Anything Trumps Hillary, Libya mail - Stockman

No one in their right mind could have concluded that the aging, pacified, tent-bound Moammar Khadafy was a threat to the safety and security of the American people.

 Even the community organizer from South Chicago wanted to keep the American bombers parked on their runways.

But Hillary’s infamous emails leave no doubt that it was she who induced Obama to embrace the folly that quickly created yet another failed state, hotbed of jihadism and barbaric hellhole in the middle east. Indeed, her hands are doubly bloody.

When Hillary bragged that “We came, we saw, he died”, it turns out that not just Khadafy but thousands of innocents have died, and not just from the chaos unleashed in Libya itself. 

The former dictator’s arsenals and mercenaries have now been dispersed all over North Africa and the middle east, spreading desolation in their wake.

David Stockman 27  April 2016

När Khaddafi fick jobb som EU:s gränspolis
I början av oktober 2010 åkte EU-kommissionär Cecilia Malmström till Libyen
Annika Ström Melin, Signerat, DNs ledarsida 24 augusti 2011

Storbritanniens utrikesminister William Hague anlände på lördagen till rebellfästet Benghazi i Libyen, efter att Nato för första gången använt brittiska och franska stridshelikoptrar i intensiva luftstrider.
DN 4 juni 2011