Banks & Interest Rates Archives - Page 55 of 61

March 20, 2012

You can't borrow yourself out of debt: The Secret of Oz

“You can’t borrow yourself out of debt any more than drink yourself sober.”

http://www.youtube.com/watch?v=swkq2E8mswI

Bill Still on the on-going debt problem and the solution proposed by L. Frank Baum in the Wizard of Oz.

Comment:~ The solution proposed is not a magic bullet. Money printed by Treasury, whether in the form of banknotes (“scrip”) or tally sticks, is still Treasury debt; Treasury effectively borrows when the currency is issued in payment and settles when the notes are presented in payment of taxes. It also debases the currency, though not as fast as debt created by the banks. This video serves as a reminder that we still have not solved the global debt problem — merely postponed the inevitable by issuing further debt.

March 17, 2012

MARC FABER: Beware The Unintended Consequences Of Money Printing

Marc Faber: I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing and once you choose that path you’re in it, and you have to print more money.

If you start to print, it has the biggest impact. Then you print more – it has a lesser impact unless you increase the rate of money printing very significantly. And, the third money printing has even less impact. And the problem is like the Fed: they printed money because they wanted to lift the housing market, but the housing market is the only asset that didn’t go up substantially.

In general, I think that the purchasing power of money has diminished very significantly over the last ten, twenty, thirty years, and will continue to do so.

via MARC FABER: Beware The Unintended Consequences Of Money Printing.

March 17, 2012

The Power of Cheap Money | Puru Saxena | Safehaven.com

Mr. Bernanke is intentionally suppressing the nominal risk free rate of return and he is forcing investors to search for yield. By keeping interest rates artificially low and well below the rate of inflation, the Federal Reserve has engineered this impressive rally in American stocks.

Figure 2 captures the real US Treasury Yield Curve [after deducting inflation] across various maturities. As you can see, the real yields of the entire US Treasury Yield Curve (except the 30-Year US Treasury Bond) are currently negative.

Real US Treasury Yields

via The Power of Cheap Money | Puru Saxena | Safehaven.com.

March 14, 2012

Citigroup Vows to Try Again as Some Lenders Fail Fed Test – Bloomberg

Citigroup (C), SunTrust (STI), MetLife (MET) and Ally Financial failed to get their capital plans approved in the Fed’s stress tests, which mandated a minimum tier 1 capital ratio of 5%. Citi had a projected 4.9% ratio under the tests, SunTrust a 4.8% ratio, and Ally a mere 2.5% ratio.

The Fed is testing to see how the capital of U.S. banks might hold up through a deep recession and a second housing crisis. The scrutiny focused on variables such as trading and counterparty losses and write-offs on credit cards and first-lien mortgages. Most of the 19 banks passed.

via Citigroup Vows to Try Again as Some Lenders Fail Fed Test – Bloomberg.

March 12, 2012

Carmen Reinhart: Financial Repression – WSJ

Carmen Reinhart marks the rise of financial repression. “Faced with a private and public domestic debt overhang of historic proportions, policy makers will be preoccupied with debt reduction, debt management, and, in general, efforts to keep debt-servicing costs manageable. In this setting, financial repression in its many guises with its dual aims of keeping interest rates low and creating or maintaining captive domestic audiences will probably find renewed favor and will likely be with us for a long time.”

via Secondary Sources: Financial Repression, Jobs and Growth, Daylight Saving Scam – Real Time Economics – WSJ.

March 7, 2012

Fed Weighs ‘Sterilized’ Bond Buying if It Acts – WSJ.com

JON HILSENRATH: Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

Transactions like those under the third scenario are called “reverse repos.” A related program called “term deposits” also ties up short-term money held by banks. The effect of this approach is the same as Operation Twist: The Fed would hold more long-term bonds and investors and banks would get more short-term holdings in exchange.

via Fed Weighs ‘Sterilized’ Bond Buying if It Acts – WSJ.com.

March 5, 2012

Morgan Stanley Still Expects QE3 This Year – WSJ

“For some time, our call has been that the Federal Reserve will undertake additional balance-sheet action in the first half of 2012,” writes Vincent Reinhart, an economist with the bank and a former top-level Fed staffer.

He argues it’s most likely the Fed will act to expand its balance sheet via Treasury and mortgage bond buying — in market parlance, QE3 — at either the April or June Federal Open Market Committee, and that the ultimate size of the program could tack on $500 billion to $700 billion onto what is currently a $2.9 trillion balance sheet. There’s also a chance they will put in place a modified version of the current effort to sell short-dated bonds to buy longer-dated securities.

Why act? Reinhart says the second half of the year will box the Fed in politically. Officials won’t wish to be seen starting a high-profile action in the thick of the presidential campaign. Also, he reckons growth will still be too weak, and inflation will be falling short of the Fed’s 2% target.

via Morgan Stanley Still Expects QE3 This Year – Real Time Economics – WSJ.

March 1, 2012

Five Largest Banks ‘Should Be Broken Up’: Fed’s Fisher – CNBC

The five biggest banks in the United States are too powerful and should be broken up, Dallas Fed President Richard Fisher said on Wednesday.

The financial crisis has left the five biggest banks even more powerful than before, he said at an event in Mexico City……

“After the crisis, the five largest banks had a higher concentration of deposits than they did before the crisis,” he said. “I am of the belief personally that the power of the five largest banks is too concentrated.”

via Five Largest Banks ‘Should Be Broken Up’: Fed’s Fisher – US Business News – CNBC.

February 29, 2012

ECB Allots €529.5 Billion in Long-Term Refinancing Operation – WSJ.com

LONDON—The European Central Bank said it handed out €529.5 billion $712.7 billion in cheap, three-year loans to 800 lenders, the central bank’s latest effort to arrest a financial crisis now entering its third year. Wednesday’s loans were on top of the €489 billion of similar loans the ECB dispensed to 523 banks in late December. The ECB’s goal is both to avoid an escalating crisis as banks struggle to pay off maturing debts and to mitigate a sharp pullback in bank lending to customers across ailing European economies……about two-thirds of the loans went to banks in three euro-zone countries — two in the “periphery,” likely Spain and Italy, and one in the “core,” likely France or Germany.

via ECB Allots €529.5 Billion in Long-Term Refinancing Operation – WSJ.com.

February 15, 2012

QE3 – Wall Street’s biggest fantasy? | WSJ.com

WSJ.com – Mean Street

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Steven Russolillo discusses the prospects of another round of quantitative easing by the Federal Reserve based on recent comments by Dallas Fed Chief Richard Fisher.