W pętli ZIRP

"Wczorajszy komunikat po posiedzeniu FOMC jest majstersztykiem polityki monetarnej w świecie zerowych stóp procentowych (ZIRP), ale naprawdę w tle widać grę z polityką innych banków centralnych i strach przed konsekwencjami, jakie mogą przynieść… rynkowe oczekiwania."

http://blogi.bossa.pl/2014/12/18/w-petli-zirp/

BIS Slams the Fed; Ridiculous Question of the Day: "Is The Fed Going To Attempt A Controlled Collapse?"

Obszernym fragmentem wpisu jest podsumowanie w 31 punktach ostatniego raportu Bank for International Settlements (BIS), które warto przeczytać.

"The question stems from lengthy (256 page PDF) from the BIS Annual Report (Bank for International Settlements) that stated among other things "The only source of lasting prosperity is a stronger supply side. It is essential to move away from debt as the main engine of growth."

The BIS slammed the Fed in numerous places and in numerous ways, especially regarding the Fed's reliance on QE."

"30. Policy responses matter too. Central banks find it difficult to operate with policy rates that are considerably different from those prevailing in the key currencies, especially the US dollar. Concerns with exchange rate overshooting and capital inflows make them reluctant to accept large and possibly volatile interest rate differentials, which contributes to highly correlated short-term interest rate movements. Indeed, the evidence is growing that US policy rates significantly influence policy rates elsewhere. Very low interest rates in the major advanced economies thus pose a dilemma for other central banks. On the one hand, tying domestic policy rates to the very low rates abroad helps mitigate currency appreciation and capital inflows. On the other hand, it may also fuel domestic financial booms and hence encourage the build-up of vulnerabilities. Indeed, there is evidence that those countries in which policy rates have been lower relative to traditional benchmarks, which take account of output and inflation developments, have also seen the strongest credit booms."

http://globaleconomicanalysis.blogspot.com/2014/07/bis-slams-fed-ridiculous-question-of.html

Why Europe Needs Two Euros, Not One

"As the Eurozone cautiously implements stabilising reforms, Germany is forced to go further with concessions than it would prefer. This column suggests that it would be beneficial for discontented members to consider the formation of a second monetary union. The second euro can be constructed better than the first, bringing the discontented members exchange-rate adjustments relative to Germany, and avoiding competitive devaluations."

"A repeated question about the Eurozone is whether the members form an optimal currency area. But another question – which is actually closer to Mundell’s original contribution (Mundell 1961) – is whether the right number of currencies in the Eurozone is as high as 18, the number of member countries in the system. If the right number is neither 1 nor 18, then 2 may be far, far better than either extreme.

Let me begin by recalling the reasons why 18 would be too many. First, some of the members are probably small enough to have no scope for using monetary or exchange rate policy as a tool of economic stabilisation over the business cycle (McKinnon 1963). Next, the 18 members do form an economically integrated group of geographical neighbours, and therefore their mutual efforts to use monetary and exchange rate policy to their advantage could easily lead them to enter into non-cooperative games with costly Nash consequences. Finally, national monetary policy can mean Treasury-dominated monetary policy, which can lead to very poor outcomes apart from strategic games with any foreigners, near and far."

http://www.nakedcapitalism.com/2014/07/europe-needs-two-euros-one.html

The Bond Trap

"The American financial establishment has an incredible ability to celebrate the inconsequential while ignoring the vital. Last week, while the Wall Street Journal pondered how the Fed may set interest rates three to four years in the future (an exercise that David Stockman rightly compared to debating how many angels could dance on the head of a pin), the media almost completely ignored one of the most chilling pieces of financial news that I have ever seen. According to a small story in the Financial Times, some Fed officials would like to require retail owners of bond mutual funds to pay an "exit fee" to liquidate their positions. Come again? That such a policy would even be considered tells us much about the current fragility of our bond market and the collective insanity of layers of unnecessary regulation."

http://www.europac.net/commentaries/bond_trap

Is It Time for the Fed to Contract Its Balance Sheet?

"The Federal Reserve can keep their balance sheet at the current size (and keep the risk asset party going) or it can position itself to be able to hike rates — but it cannot do both."

"It’s often mentioned that the Fed buys bonds in asset swaps. This is true. Where many people get confused is that it is not an asset swap for the banks. When the Fed buys bonds, they typically buy them from non-banks. The bonds are removed from circulation and put on the Fed’s balance sheet, while the Fed pays for these bonds with newly created reserves. Now these reserves must be deposited at a bank, so they will show up at a bank as new deposits."

http://blogs.cfainstitute.org/investor/2014/06/26/can-the-fed-raise-rates-without-throwing-cold-water-on-risk-assets/

Why Negative Rates Won't Work In The Eurozone

"It seems unlikely that the ECB is unaware of the effect of negative rates on Danish lending volumes. So despite extensive comments in the media about negative rates encouraging banks to lend, I doubt if that is the real purpose. Indeed, as M3 lending figures for the Eurozone actually improved slightly in April, it is hard to see why the ECB would act now when it did not earlier this year.

So I don’t think this is about bank lending at all. I think it is about German disinflation and the exchange value of the Euro."

http://www.forbes.com/sites/francescoppola/2014/06/04/why-negative-rates-wont-work-in-the-eurozone/

The Myth of the Omnipotent Central Bank

"“Inflation”, said Milton Friedman, “is always and everywhere a monetary phenomenon”. Upon this statement has been built three decades of faith in the omnipotence of central banks. It does not matter what government does: it does not matter what markets do: it does not matter what shocks there are to the economy. As long as central banks get the money supply right, there will be no inflation. Or deflation. Growth will simply proceed smoothly along a pre-determined path.

Leaving aside the question of whether central banks really control the money supply at all in an endogenous fiat money system, it is clear to me that the control of inflation – in all its forms – is by no means so simple. Despite Friedman’s statement, the forces that create inflation and deflation are in reality poorly understood."

http://pragcap.com/the-myth-of-the-omnipotent-central-bank

Saving, lending and tapering combine in a perfect storm

"By tapering its QE purchases, the Fed is reacting to a decline in the banking system's demand for bank reserves, because the growth of savings deposits has been decelerating for the past two years. In fact, in the past three months savings deposits at U.S. banks have only grown at a mere 1.4% annualized pace, and they have not grown at all since the Fed started tapering its QE purchases in early January. For most of the past several years, the Fed's QE bond purchases served mainly to accommodate the public's seemingly insatiable demand for safe, short-term savings deposits. That's changed significantly in the past few months, however. The private sector is no longer so risk-averse, and banks are apparently also less risk-averse; that would explain why loan volume is expanding and savings deposit inflows have come to a virtual halt. The slowdown in deposit growth and the increase in bank lending are both signs of a return of confidence. The return of confidence is the Fed's worst nightmare."

http://scottgrannis.blogspot.com/2014/03/saving-lending-and-tapering-combine-in.html

The Fed’s Actions in 2008: What the Transcripts Reveal

"On Friday, the Federal Reserve released the transcripts of the 2008 meetings of its Federal Open Market Committee, which sets monetary policy. The transcripts provide a detailed account of some of the Fed's key decisions during that crisis year. Here is a look at the fuller picture that the documents have provided."

"Federal Reserve officials are unaware in January 2008 that the economy has already entered a recession. But the Fed's chairman, Ben S. Bernanke, and his closest advisers are feeling nervous. They worry that the Fed's actions at the end of 2007 have been insufficient, and that tumbling stock prices represent the start of a broader pullback in investment."

http://www.nytimes.com/interactive/2014/02/21/business/federal-reserve-2008-transcripts.html

When Will the Fed End Its Zero Rate Policy?

"U.S. Treasury yields and other interest rates increased in the months leading up to the Federal Reserve’s December 2013 decision to cut back its large-scale bond purchases. This increase in rates probably at least partly reflected changes in what bond investors expected regarding future monetary policy. Recent research on this episode tentatively suggests that investors moved earlier the date when they believed the Fed would exit its zero interest rate policy, even though Fed policymakers made few changes in their projections of appropriate monetary policy."

http://www.frbsf.org/economic-research/publications/economic-letter/2014/february/zero-interest-rate-investor-expectations-liftoff-monetary-policy/

Banks Don't Lend Out Reserves

"Firstly, here’s a short explanation of bank lending. Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit. It creates this “from thin air”, not from existing money: banks do not “lend out” existing deposits, as is commonly thought."

"When the Fed buys private sector assets from investors, it not only creates new deposits, it creates new reserves. This is because a new deposit (liability) in a bank must be balanced by an equivalent asset. When banks create deposits by lending, the equivalent asset is a loan. When the Fed creates deposits by buying assets, the equivalent asset is an increase in reserves, also newly created. So it does not matter how much lending banks do, if the Fed is creating new deposit/reserve pairs by buying assets from private sector investors then deposits will ALWAYS exceed loans by the amount of those new reserves."

http://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/

Monetary Tectonics: 50 Slides Illustrating The Tug Of War Between Inflation And Deflation

Polecam przeglądnąć opracowanie od Incrementum AG o obecnej polityce monetarnej (w szczególności inflacji i deflacji oraz ich czynnikach i konsekwencjach). Sporo wykresów i komentarzy.

http://www.incrementum.li/wp-content/uploads/2014/01/Monetary-Tectonics-Inflation-vs-Deflation-Incrementum-Chartbook-2.pdf

Bernanke – lepszy Friedman

"Ben Bernanke to chyba jedyny ekonomista, który swoją wypracowaną teorię i badania empiryczne miał okazję sam sprawdzić w praktyce na tak wielką skalę. Dlaczego nazwałem go lepszym Miltonem Friedmanem? Bo był w pewnym sensie jest uczniem Friedmana – propagował jego koncepcję przyczyn Wielkiej Depresji, przyznawał polityce pieniężnej stabilizacyjną rolę itd. Ale jednocześnie brak mu ideologicznego ferworu, nie jest rycerzem walki z państwem wszędzie i za każdą cenę, co pozwoliło mu posunąć myślenie dotyczące polityki pieniężnej znacznie na przód. (...)"

http://highbookvalue.com/2013/12/19/470/

Germany's investment problem

"We all know that Euro membership has been of doubtful benefit to periphery countries such as Greece and Portugal. But Germany has been a net beneficiary of the Euro, hasn't it?"

"And it is also a story of too-tight fiscal policy. Instead of increasing its own borrowing to compensate for the fall in NFC borrowing, the German government gradually reduced its fiscal deficit - indeed in 2007 and 2008, it was net saving (running a surplus). On the face of it, this looks sensible: after all, we are led to believe that governments should net save during booms. But not, emphatically not, when there is a growing current account surplus. A persistent current account surplus is contractionary over the medium-term, because it by definition means that productive investment is leaving the country."

http://coppolacomment.blogspot.co.uk/2013/12/germanys-investment-problem.html

Stopy procentowe mogą być wciąż zbyt wysokie

"Polityka pieniężna w USA może być zbyt restrykcyjna, a jej odpowiednie poluzowanie – niemożliwe. Przez to Stany Zjednoczone mogą tkwić w długotrwałej stagnacji, przypominającej Japonię ostatnich dwóch dekad. Tą hipotezą, wypowiedzianą podczas zaledwie 16-minutowego przemówienia, znany ekonomista Lawrence Summers wzbudził burzliwą dyskusję."

"Hipoteza jest następująca. W Stanach Zjednoczonych realna naturalna stopa procentowa, czyli stopa zapewniająca maksymalny wzrost niewywołujący napięć inflacyjnych, znajduje się głęboko poniżej zera – na poziomie ok. minus dwóch, minus trzech procent. Polityka pieniężna nie jest w stanie osiągnąć tak niskiej realnej stopy, więc bieżący koszt kapitału jest wyższy niż koszt zapewniający optymalną alokację oszczędności i pracowników. To zaś trwale blokuje popyt i prowadzi do długotrwałej stagnacji.

Powody tego zjawiska mogą być różne – Summersowi zabrakło czasu, by je wyjaśnić, ale najczęściej wymienia się następujące przyczyny: nadmierne oszczędności w Azji, eksportowane do Stanów Zjednoczonych, nadmierne oszczędności ludzi zamożnych, których liczba rośnie lawinowo, a którzy nie mogą konsumować dużej części swojego dochodu, duże oszczędności ludzi spłacających zadłużenie po ostatnim kryzysie, początek kryzysu demograficznego, czy też zastój innowacyjności."

http://www.obserwatorfinansowy.pl/forma/debata/stopy-procentowe-moga-byc-wciaz-zbyt-wysokie/

The Unemployment Rate at Full Employment: How Low Can You Go?

"A lot of people are talking about full employment these days. Lawrence Summers bemoaned its long-term absence at an important talk at the International Monetary Fund recently. Janet Yellen, nominated by President Obama to head the Federal Reserve, stressed that institution’s role in meeting the goal of full employment during her Senate hearing last week. (...)

What follows is all about the first question, but let us briefly note why this matters so much, even — we’d say especially — now. To policy makers at the Federal Reserve and the many economists who watch and critique their every move, the unemployment rate associated with full employment is a key parameter. It’s a landing strip that determines their flight path in ways that have profound implications for the passengers on board, especially, as we stress below, those sitting in coach. (...)

For economists, the question we’re asking is this: What is the lowest unemployment rate consistent with stable inflation, otherwise known as the nonaccelerating inflation rate of unemployment, or Nairu?"

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-unemployment-rate-at-full-employment-how-low-can-you-go

Ujemne stopy procentowe

"Summers zauważa poważny problem. Od długiego czasu, na pewno poprzedzającego obecny kryzys, gospodarka amerykańska nie była w stanie wygenerować szybkiego wzrostu popytu. I to pomimo powstawania kolejnych baniek na rynkach aktywów – bańki dotcomowej, bańki na rynku nieruchomości, gwałtownego wzrostu cen dzieł sztuki, czy czegokolwiek innego. W tym okresie stopy procentowe były utrzymywane na niskim poziomie, ale inflacja mimo to pozostawała pod kontrolą, a wzrost gospodarczy jakoś nie wskazywał na przegrzewanie się gospodarki. Taką sytuację nazywa sekularną stagnacją (secular stagnation). Niezależnie od szczegółów Summers ma rację, że coś jest tutaj nie tak…"

"Jeżeli Summers ma rację i gospodarka USA oraz niektóre inne gospodarki rozwinięte mają ujemne neutralne stopy procentowe, to banki centralne muszą przemyśleć parę spraw. Po pierwsze, stopy nominalne pozostaną na poziomie bliskim zera przez baaaaardzo długi czas, choć akurat to nikogo nie powinno dziwić. Po drugie, aby wygenerować wyraźnie ujemną realną stopę, to przy zerowej stopie nominalnej, trzeba jakoś postarać się o wysokie oczekiwania inflacyjne (w końcu: stopa realna = stopa nominalna – oczekiwana inflacja = 0% – oczekiwana inflacja). A zrobić to można na przykład poprzez podniesienie celu inflacyjnego do wyższego poziomu, na przykład z 2% do 4%."

http://randomjog.wordpress.com/2013/11/23/ujemne-stopy-procentowe/

QE and ultra-low interest rates: Distributional effects and risks

Polecam przeglądnąć kompleksowy raport od McKinsey (pdf w pełnej wersji do ściągnięcia w linku).

"A new report from the McKinsey Global Institute examines the distributional effects of these ultra-low rates. It finds that there have been significant effects on different sectors in the economy in terms of income interest and expense. From 2007 to 2012, governments in the eurozone, the United Kingdom, and the United States collectively benefited by $1.6 trillion both through reduced debt-service costs and increased profits remitted from central banks (exhibit). Nonfinancial corporations—large borrowers such as governments—benefited by $710 billion as the interest rates on debt fell. Although ultra-low interest rates boosted corporate profits in the United Kingdom and the United States by 5 percent in 2012, this has not translated into higher investment, possibly as a result of uncertainty about the strength of the economic recovery, as well as tighter lending standards. Meanwhile, households in these countries together lost $630 billion in net interest income, although the impact varies across groups. Younger households that are net borrowers have benefited, while older households with significant interest-bearing assets have lost income."

http://www.mckinsey.com/insights/economic_studies/qe_and_ultra_low_interest_rates_distributional_effects_and_risks

Janet Yellen: What's Ahead For The Fed?

"Unlike current Fed chief Ben Bernanke, who enjoyed a relatively quiet first year in office before the financial crisis let loose, Yellen is likely to experience trial by fire from the get-go."

http://www.forbes.com/sites/knowledgewharton/2013/10/24/212013/

The Fed's objective is to destroy the demand for cash

"Within the next several months, the Fed is likely to announce the tapering of QE. That's not a big surprise, but this time there is an interesting twist: in order to offset the risk that tapering might cause interest rates to move higher—which could slow the still-weak housing market and the still-weak economy—the Fed will also announce a lowering of the unemployment rate threshold that would prompt them to begin raising interest rates. By doing this the Fed would be removing some of the unwinding risk that continued tapering creates, while at the same time keeping bond yields from increasing, since a lower unemployment rate threshold would significantly extend the period during which the Fed would keep short-term interest at or near zero."