Banks & Interest Rates Archives - Page 53 of 62

September 1, 2012

Bernanke Speech Makes Detailed Case for Fed Action – NYTimes.com

The Fed Chairman hinted at further measures to stimulate employment but is still playing his cards close to his chest as to when and how much:

“It is important to achieve further progress, particularly in the labor market,” Mr. Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

via Bernanke Speech Makes Detailed Case for Fed Action – NYTimes.com.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

August 22, 2012

When will the Fed QE?

Is the Fed likely to introduce new asset purchases before or after the November election? Peter Boockvar at The Big Picture writes:

Bottom line, of the 10 voting FOMC members, 8 are doves so it will always be the case that “many” are ready for more QE if need be. The hawks are few and far between. I stick to my belief that more QE is coming on Sept 13th as the Oct meeting is too close to the election and Bernanke won’t act in Dec if Romney wins. This could be his last chance for a while and Ben still seems to believe in the pixie dust of QE.

CNBC reports Nomura’s Bob Janjuah is predicting more quantitative easing from the Federal Reserve in December.

Those hoping for a big bazooka from the Fed or the European Central Bank before December will be disappointed, [Janjuah] said.

My view is that September is too soon: the Fed is likely to hold off until after the election unless the situation gets desperate. And December is too soon afterwards. Early 2013 seems a safer bet.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 22, 2012

Money Fund Reforms Seen Harming Alternative to Banks

SEC attempts to reform the money market industry are running into opposition from corporate treasurers. Maria Sapan from Securities Technology Monitor writes:

The Securities and Exchange Commission has proposed rules that would revamp the $2.6 trillion U.S. money market fund industry, arguing it remains a risk to the financial system. Last month, [Thomas C. Deas, Jr., the treasurer of chemical company FMC Corp and chairman of the National Association of Corporate Treasurers] testified before a House subcommittee that the reforms – such as floating the funds’ net asset value or imposing new capital requirements – would “have a significant negative impact on the ongoing viability of these funds, and also adversely affect the corporate commercial paper market.”

Money market funds are effectively involved in maturity transformation — borrowing short and lending long — which is a function of banks. Maturity transformation is vulnerable to bank runs in times of uncertainty, where depositors demand repayment and borrowers are unable to comply because of liquidity pressures. My view is that if you want to perform the functions of a bank, you need to be registered as a bank, with the same reserve requirements as other banks, and supervised by the Fed. Avoiding these requirements may provide cheaper sources of credit to large corporates, but at the cost of increased risk to the entire economy.

via Money Fund Reforms Seen Harming Alternative to Banks.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 22, 2012

Fed Minutes Suggest Action Likely – WSJ.com

By JON HILSENRATH And KRISTINA PETERSON

The Federal Reserve sent its strongest signal yet that it is preparing to take new steps to bolster the recovery, saying that measures would be needed fairly soon unless economic growth picks up substantially.

The statement was included in minutes released Wednesday from the Fed’s July 31-Aug. 1 policy meeting. The minutes also indicated that a new round of bond buying, known as quantitative easing, was high on its list of options.

via Fed Minutes Suggest Action Likely – WSJ.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 22, 2012

Germany backs Draghi bond plan against Bundesbank – Telegraph

By Ambrose Evans-Pritchard,
9:39PM BST 20 Aug 2012

“A currency can only be stable if its future existence is not in doubt,” said Jörg Asmussen, the powerful German member of the ECB’s executive board. He signalled full backing for the bond rescue plan of ECB chief Mario Draghi, brushing aside warnings from the German Bundesbank that large-scale purchases would amount to debt monetisation and a back-door fiscal rescue of insolvent states in breach of EU treaty law.

via Germany backs Draghi bond plan against Bundesbank – Telegraph.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

Friedman’s Japanese lessons for the ECB « The Market Monetarist

Milton Friedman, December 1997:

Defenders of the Bank of Japan will say, “How? The bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?”

The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so. Higher monetary growth will have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately. A return to the conditions of the late 1980s would rejuvenate Japan and help shore up the rest of Asia.

via Friedman’s Japanese lessons for the ECB « The Market Monetarist.

Friedman was suggesting that the BOJ implement QE to boost the money supply and create inflation. Inflation would rescue the banks and real-estate-owners with underwater mortgages.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 28, 2012

David Stockman

David Stockman, former Director of the Office of Management and Budget under President Ronald Reagan, gives Alex Daley a run-down of the Fed’s performance.

Duration 30:43

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 24, 2012

Christian Noyer: Monetizing public debt

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: Some central banks have developed large-scale public debt acquisition programmes. They have done so for reasons relating to immediate macroeconomic stabilisation… to go beyond the zero-interest rate limit. The Eurosystem as well intervened on a much smaller scale when malfunctioning debt markets prevented the effective transmission of monetary policy impulses. There is not a single central bank that is seriously considering the monetisation of deficits with the more or less declared intention of reducing the weight of debt via inflation. In my view, this notion is nothing more than a financial analyst’s fantasy.

via Christian Noyer: Public and private debt – imbalances of global savings.
Comment:~ No central bank has declared an intention to monetize public debt (or deficits) — reducing public debt via inflation — but without a viable alternative how many will end up there? Gary Shilling points out that “competitive quantitative easing by central banks is now the order of the day.” The Bank of Japan last year “expanded its balance sheet by 11 percent, while the Federal Reserve’s increased 19 percent, the European Central Bank’s rose 36 percent and the Swiss National Bank’s grew 33 percent.” Japan, after 20 years of stagnation and with net public debt at 113% of GDP, illustrates the predicament facing many developed countries. If there was a plan B they would have tried it by now.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 16, 2012

A lack of money isn't the problem: it's time to shrink – The Drum – ABC News

Alan Kohler: Debt was built up through 30 years of current account imbalances after currencies were finally unshackled from the gold standard in 1971, and the depression of the 70s came to an end in 1982.

Central banks, principally the Federal Reserve, complied in the process of debt build-up by holding down interest rates and allowing asset prices to rise, keeping balance sheets in the black.

The credit crisis of 2007-08 brought asset prices down rapidly and rendered banks suddenly insolvent, so they had to be recapitalised by governments. Now the governments of Europe, the US and Japan are insolvent, and the only question is when the central banks will monetise their debt – that is, print more money and buy their debts…..

via A lack of money isn’t the problem: it’s time to shrink – The Drum – ABC News (Australian Broadcasting Corporation).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 9, 2012

Basel takes aim at Mega Bank | | MacroBusiness

Deep T: As the research previously posted here on MB shows, Mega Bank [the big four Australian banks: NAB, CBA, WBC and ANZ] carries a level of capital against residential mortgages that is less than 2% even with mortgage insurance. Mega Bank uses internal risk based models to determine the amount of capital which are primarily based on the historical default rate of Australian mortgages relative to loan to value ratios. The period over which Mega Bank assesses the historical default rate is primarily over a period of rising house prices fueled by the expansion of mortgage credit by Mega Bank. Thereby masking probable default levels over a more benign period…..

via Basel takes aim at Mega Bank | | MacroBusiness.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.