{"id":6377,"date":"2012-12-05T21:56:09","date_gmt":"2012-12-06T02:56:09","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=6377"},"modified":"2012-12-05T21:56:09","modified_gmt":"2012-12-06T02:56:09","slug":"how-cancelling-central-banks-holdings-of-government-debt-could-be-a-useful-thing-ft-alphaville","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/12\/05\/how-cancelling-central-banks-holdings-of-government-debt-could-be-a-useful-thing-ft-alphaville\/","title":{"rendered":"How cancelling central banks\u2019 holdings of government debt could be a useful thing | FT Alphaville"},"content":{"rendered":"

FT’s Kate Mackenzie writes: Morgan Stanley cross-asset strategist Gerard Minack says the remarkable thing about developed economy deleveraging is how little of it has happened:<\/p>\n

The credit super-cycle ended four years ago, but leverage has hardly fallen in major economies: debt-to-GDP ratios remain historically high.<\/p>\n

\"Debt<\/p>\n

Minack says the problem is some of that deleveraging (particularly for households) is being tackled by saving more, but that won\u2019t solve the problem, or at least not very quickly. This is because of what the borrowings were used to finance: mostly pre-existing assets (that were forecast to rise in value) rather than expenditure.<\/p><\/blockquote>\n

There is a simple reason why deleveraging is taking so long: governments are borrowing money (deficit-spending) to offset private sector deleveraging and avert a deflationary spiral. So overall (non-financial) debt to GDP ratios, which include government debt, are almost unchanged.<\/p>\n

That is not necessarily a bad thing — unless you would prefer a 1930s-style 50% drop in GDP after a deflationary spiral. What can be destructive is funding government deficits from offshore because you eventually have to pay the money back. Far better to borrow from yourself — in other words your “independent” central bank. That way you never have to pay it back.<\/p>\n

As for canceling central bank holdings of government debt. Why bother? Interest payments made on the debt go right back to the Treasury as central bank profit distributions. And why set a precedent? I doubt many would believe government promises that this was a once-off and would never be repeated…….until next time.<\/p>\n

via How cancelling central banks\u2019 holdings of government debt could be a useful thing | FT Alphaville<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

FT’s Kate Mackenzie writes: Morgan Stanley cross-asset strategist Gerard Minack says the remarkable thing about developed economy deleveraging is how little of it has happened: The credit super-cycle ended four years ago, but leverage has hardly fallen in major economies: debt-to-GDP ratios remain historically high. Minack says the problem is some of that deleveraging (particularly … <\/p>\n

Continue reading “How cancelling central banks\u2019 holdings of government debt could be a useful thing | FT Alphaville”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31],"tags":[989,992,993],"class_list":["post-6377","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","tag-deficit-spending","tag-deflationary-spiral","tag-deleveraging"],"yoast_head":"\nHow cancelling central banks\u2019 holdings of government debt could be a useful thing | FT Alphaville - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How cancelling central banks\u2019 holdings of government debt could be a useful thing | FT Alphaville - the patient investor\" \/>\n<meta property=\"og:description\" content=\"FT’s Kate Mackenzie writes: Morgan Stanley cross-asset strategist Gerard Minack says the remarkable thing about developed economy deleveraging is how little of it has happened: The credit super-cycle ended four years ago, but leverage has hardly fallen in major economies: debt-to-GDP ratios remain historically high. 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He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.","sameAs":["https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/","https:\/\/www.instagram.com\/colin_thepatientinvestor","https:\/\/au.linkedin.com\/in\/colintwiggs"],"url":"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9tQ4n-1ER","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":10317,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/15\/ray-dalio-the-economic-machine-and-beautiful-deleveraging\/","url_meta":{"origin":6377,"position":0},"title":"Ray Dalio: The Economic Machine and Beautiful Deleveraging","author":"ColinTwiggs","date":"July 15, 2014","format":false,"excerpt":"Ray Dalio, founder of Bridgewater Associates, released a 30 minute video in 2013, explaining his template of the economy and how central banks and government should manage a deleveraging like the Great Recession and its after-effects. http:\/\/youtu.be\/PHe0bXAIuk0 Ray proposes three simple rules to avoid future crises: Don't let debt grow\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/img.youtube.com\/vi\/PHe0bXAIuk0\/0.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2678,"url":"https:\/\/thepatientinvestor.com\/index.php\/2011\/12\/18\/debt-and-deleveraging-the-global-credit-bubble-and-its-economic-consequences-mckinsey-global-institute-financial-markets-mckinsey-company\/","url_meta":{"origin":6377,"position":1},"title":"Debt and deleveraging: The global credit bubble and its economic consequences | McKinsey Global Institute","author":"ColinTwiggs","date":"December 18, 2011","format":false,"excerpt":"Empirically, a long period of deleveraging nearly always follows a major financial crisis. Deleveraging episodes are painful, lasting six to seven years on average and reducing the ratio of debt to GDP by 25 percent. GDP typically contracts during the first several years and then recovers. via Debt and deleveraging:\u2026","rel":"","context":"In "Debt Levels"","block_context":{"text":"Debt Levels","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/debt-levels\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2664,"url":"https:\/\/thepatientinvestor.com\/index.php\/2011\/12\/16\/mark-carney-growth-in-the-age-of-deleveraging\/","url_meta":{"origin":6377,"position":2},"title":"Mark Carney: Growth in the age of deleveraging","author":"ColinTwiggs","date":"December 16, 2011","format":false,"excerpt":"Today, American aggregate non-financial debt is at levels similar to those last seen in the midst of the Great Depression. At 250 per cent of GDP, that debt burden is equivalent to almost US$120,000 for every American (Chart 1). .....backsliding on financial reform is not a solution to current problems.\u2026","rel":"","context":"In "China & HK"","block_context":{"text":"China & HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":27803,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/09\/09\/low-interest-rates-and-the-debt-trap\/","url_meta":{"origin":6377,"position":3},"title":"Low interest rates and the debt trap","author":"Colin Twiggs","date":"September 9, 2021","format":false,"excerpt":"Since 1980, debt levels have more than doubled, from 1.4 times GDP to more than 2.8 in Q1 this year. The rise has been facilitated (and encouraged) by a sharp fall in long-term interest rates, with 10-year Treasury yields falling from a peak of close to 16% in September 1981\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3311,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/01\/17\/nouriel-roubinis-global-economonitor-the-straits-of-america\/","url_meta":{"origin":6377,"position":4},"title":"Nouriel Roubini’s Global EconoMonitor \u00bb The Straits of America","author":"ColinTwiggs","date":"January 17, 2012","format":false,"excerpt":"Given the bearish outlook for US economic growth, the Fed can be expected to engage in another round of quantitative easing. But the Fed also faces political constraints, and will do too little, and move too late, to help the economy significantly. Moreover, a vocal minority on the Fed\u2019s rate-setting\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":14902,"url":"https:\/\/thepatientinvestor.com\/index.php\/2017\/03\/06\/can-australia-dodge-the-great-deleveraging-macrobusiness\/","url_meta":{"origin":6377,"position":5},"title":"Can Australia dodge the great deleveraging? | MacroBusiness","author":"ColinTwiggs","date":"March 6, 2017","format":false,"excerpt":"Interesting chart from UBS (via Macrobusiness). Movement between 2002 and 2016 for a number of Developed and Emerging Market (DM and EM) countries in the ratio of bank credit to GDP and bank debt to credit. The good guys are in the top left corner and the bad guys bottom\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6377","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=6377"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6377\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=6377"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=6377"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=6377"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}