Tag Archives: Pretense Of Knowledge

Fed Hawks Want Rate Hikes Soon

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“A trio of inflation hawks at the Federal Reserve — Richard Fisher, Esther George and Charles Plosser — believe it’s about time to take the punch bowl away.  The three regional Fed bank presidents are on a mission to urge their colleagues to take a tougher monetary policy stance, CNNMoney reported.  If they are successful, Americans would be hit with higher rates on mortgages, small business loans and credit cards, and many on Wall Street fear bonds and stocks would also suffer. But the Fed hawks believe the alternative to tighter policy could be high inflation and more dangerous asset bubbles.”

http://www.moneynews.com/StreetTalk/Federal-Reserve-rates-Plosser-inflation/2014/07/17/id/583292/

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Italy joins France to launch tax on high-frequency trades [2013]

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“The tax – which will apply regardless of where the transaction is executed – follows an introductory scheme launched in March in the country which taxed both exchange-based and over-the-counter share trading.  The new levy will subject high-frequency trading (HFT) to a 0.02 percent tax on trades occurring every 0.5 seconds or faster.  The idea has gained traction with 11 EU countries, also including Germany, Greece, and Spain, planning to introduce a pan-European financial transaction tax in January 2014 which will affect most equity, debt and derivative transactions. But the project has had notable critics, with many believing that trade will just seek new jurisdictions such as the U.K.”

http://www.cnbc.com/id/101002422

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Bursting Switzerland’s bubble

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“Last year, SNP chief Thomas Jordan requested a [buffer] to be introduced for Swiss banks, forcing them to hold an additional one percent of risk-weighted assets to stave off the potential dangers of the housing boom. Earlier this year, as worries about a bubble increased, the SNB instigated a number of policies to prevent any more dramatic rises. This included doubling the capital buffer requirement to two percent. However, despite a partial slowdown since January, Jordan told reporters in March that the work was not yet done. ‘The pace has slowed, but we are far away from the soft landing we want. We don’t yet see the slowdown that we would like to see.'”

http://www.worldfinance.com/wealth-management/bursting-switzerlands-bubble

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Sweden’s deflated economy: Sub-zero conditions

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“Sweden’s economy, which it oversees, grew three times faster than the euro zone’s in 2010 and dodged Europe’s double-dip recession in 2012-13. The Riksbank felt confident enough in recovery to start raising interest rates in 2010. The Riksbank worried that rising household borrowing and soaring house prices could lead to trouble down the road. It therefore opted to ‘lean against the wind’, in central bankers’ parlance, and deflate the credit boom before it burst catastrophically.  It seems instead to have taken the air out of everything but exuberant markets. Unemployment in Sweden has held steady, while Swedish private-sector debt as a share of GDP is higher now than it was in 2010.”

http://www.economist.com/news/finance-and-economics/21606895-interest-rates-are-back-crisis-lows-sub-zero-conditions

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When Zero’s Too High: Time preference versus central bankers

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“Central banking has taken interest rate reduction to its absurd conclusion. If observers thought the ECB had run out of room by holding its deposit rate at zero, Mario Draghi proved he is creative, cutting the ECB’s deposit rate to minus 0.10 percent, making it the first major central bank to institute a negative rate.  Can a central-bank edict force present goods to no longer have a premium over future goods?  Armed with high-powered math and models dancing in their heads, modern central bankers believe they are only limited by their imaginations.  More than half a decade of zero interest rates has not lifted anyone from poverty or created any jobs—it has simply caused more malinvestment.”

http://www.fee.org/the_freeman/detail/when-zeros-too-high

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Europe counts the value of prostitution, drugs to bolster GDP

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“As of September, all European Union countries will be required to take fuller accounting of trade in sex, drugs and other underground businesses as part of an overhaul of economic measurements by Eurostat, the European statistics agency.  Because GDP is such an important number one that can sway national policies and make or break politicians the European Union wants numbers ‘better reflecting the economic environment’, said Vincent Bourgeais, a Eurostat spokesman.  With EU governments obliged to reduce debt as a percentage of their economies, the changes are also expected to make growth rates look better, possibly also making debt ratios seem rosier.”

http://www.afr.com/p/world/europe_counts_the_value_of_prostitution_IpOxFOYSD6lXb4JVCl9buK

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Fed fears risks posed by exit tools; plan almost done

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“The sheer magnitude of the amounts of money used to combat the crisis – $2.6 trillion sitting at the Fed as bank reserves and $4.2 trillion held by the Fed in various securities – may complicate the U.S. central bank’s ability to control its target interest rate once the decision is made that it should be raised.  The Fed has neared consensus that its workhorse tool will be the interest it pays banks on excess reserves on deposit at the Fed.  Another tool would have a similar impact but apply more broadly, using overnight repurchase agreements that would let money market funds and other institutions as well as banks essentially make short-term deposits at the Fed.”

http://www.reuters.com/article/2014/07/11/usa-fed-idUSL2N0PM2IQ20140711

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Japan economics minister warns of premature QE exit

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“Japanese Economics Minister Akira Amari warned that it would be premature for the Bank of Japan to consider an exit strategy from its massive stimulus programme, voicing hope instead for further monetary easing if achievement of its inflation goal falls behind schedule.   The central bank has kept policy unchanged since deploying an intense burst of monetary stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate inflation to 2 percent in roughly two years.  With Japan only halfway to meeting that target, the BOJ is set to keep its stimulus plan intact well into next year.”

http://uk.reuters.com/article/2014/07/11/uk-japan-economy-amari-idUKKBN0FG06V20140711

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The Federal Reserve: Asleep at the Switch

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“Yellen conceded that higher interest rates in 2003 and 2006 might have slowed the rate of home price growth that created the housing bubble.  But, she added, such increases wouldn’t have done much to quell the rapid rise in housing prices but would have ‘weakened households’ ability to repay previous debts.’ The net effect would have been to improve ‘household balance sheets only modestly.’  What’s most disturbing about her comments is that her central bank colleagues in other countries deeply disagree with this position. They argue that low rates caused by central bank stimulus programs may be sowing the seeds for the next financial crisis.”

http://www.investingdaily.com/20677/the-federal-reserve-asleep-at-the-switch-2/

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Yellen Sees Little Threat to Financial Stability

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“Federal Reserve Chair Janet Yellen said Wednesday that she doesn’t see a need for the Fed to start raising interest rates to defuse the risk that extremely low rates could destabilize the financial system.  Yellen said she does see ‘pockets’ of increased risk-taking. But she said those threats could be addressed through greater use of regulatory tools, such as higher capital standards for banks.  Some critics of Fed policies have warned that the central bank could be setting the stage for another dangerous bubble by keeping rates so low for so long.  In her speech, Yellen said she didn’t see dangerous excesses in the financial system.”

http://abcnews.go.com/Business/wireStory/yellen-sees-threat-financial-stability-24396872

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