Saturday, July 9, 2016

Extra Links

1--The growing prospect of helicopter money

Kuroda and indeed Abe will be looking for a new approach. Monetisation of infrastructure stimulus may be the option.
Meanwhile, in an effort to calm potential concerns about the integrity of the fiscal budget central bankers implementing such a future monetisation of infrastructure spending will doubtless be at pains to describe the process as a “one off” though, as the ever theoretical Bernanke stated in his blog: "To have its full effect, the increase in the money supply must be perceived as permanent by the public."


a policy of “helicopter money” is only likely to work if it is done on an ongoing basis and in continuing and growing amounts. But at that point the risk of a policy mistake grows exponentially, in terms of a potentially destabilising pickup in inflation expectations and a related pickup in velocity.

2--BOJ’s Money Printers Rebuked: Shoppers Tighten Purse Strings, Japan Retailers Seeing Red

3--Putin: World is being pulled towards nuclear war..

4--Putin: You have encircled us with nuclear weapons. Why are you threatening us?

5--Putin: "People are tired of the dictatorship of one country."

"We do not intend to live as a country that is surrounded by enemies".

6--Putin: "Who created ISIS?"

7--China Destabilizes Global Economy by Exporting Deflation Through Currency Devaluation

As we have also warned, ZIRP and negative interest rates are destructive to banks, life insurers, and pension funds. Both the real economy and financial assets suffer in deflation. Despite lofty-looking valuations now, a financial asset is someone else’s financial liability. Many of these claims will be marked down as businesses and households struggle under sustained low growth-recessionary conditions.
The economist Herbert Stein said, “If something cannot go on forever, it will stop.” However, China has made an art form of defying Stein’s saying. And every major economy that has moved from an export-driven model to a consumption-driven one has suffered a major crisis. There are thus good reasons to expect things to end badly, but when is anybody’s guess

8--Italian banks: comment

As long as EU policy is to use the liability side of banking for market discipline, the entire payments system faces collapse.

So looks to me like it’s a rerun of events that led up to the ECB’s declaration to ‘do what it takes to prevent default’ in 2012. Up to that point the (failed) policy was to use the liability side- private debt markets- to discipline national govts and bring them back into compliance with deficit and debt limits.

The ‘answer’ is the same this time. Nothing short of an ECB liability guarantee will do the trick. This guarantee could take the form of ECB deposit insurance, unlimited and unsecured ECB bank liquidity provision, some kind of permission of national govts. to support bank liquidity, directly or indirectly, regardless of deficit and debt limits, maybe some kind of ‘euro bonds’, or whatever else they may dream up that removes the use of the liability side of banking for market discipline.

9--Signs of post-Brexit financial crisis mount

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