asterisk2a + velocity   10

Stocks are up. But it appears to us that the U.S. economy is going down. Go figure.
velocity is at 57yr low - WOW! the money that is in circulation is in less hands! the econ expanded according to GDP, but less and less $ reach on avg each hand. - "This is serious. The velocity of money tracks how often each dollar is used to buy something in the economy. Falling velocity shows that consumers and business are pulling back… becoming more reluctant to spend and invest… downsizing… and holding onto dollars rather than spending them. This has a similar effect as reducing the supply of money bidding for goods and services. Prices drop. Deflation, in other words. The bubble has developed a leak. The hot air is gushing out." //&! //&! &! - it is associated with stagnant NGDP [...] demand problem.
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april 2016 by asterisk2a
German Banks Told To Start Hoarding Cash | Zero Hedge
In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic. They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow. This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook. Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history. It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago). Banks are supposed to be conservative, responsible managers of other people’s money. When central bank policies penalize that practice, bad things tend to happen.
Richard  Koo  aggregate  demand  austerity  fiscal  policy  Pact  Schuldenbremse  economic  history  ZIRP  NIRP  QE  distortion  financial  repression  hunt  for  yield  speculative  bubbles  speculative  speculation  Venture  Capital  Mutual  Fund  Private  Equity  reflate  reflation  recovery  GFC  debtoverhang  liquidity  trap  zombie  banks  deleveraging  Debt  Super  Cycle  secular  stagnation  consumer  wage  stagnation  squeezed  middle  class  disposable  income  discretionary  spending  marginal  propensity  to  consume  tax  evasion  tax  avoidance  oligarchy  plutocracy  Super  Rich  1%  household  car  loan  credit  card  student  loan  student  loan  student  Bubble  generation  rent  OMT  job  creation  Service  Sector  Jobs  working  poor  precarious  work  Precariat  Zero  Hour  Contract  Contractor  Leiharbeit  Zeitarbeit  Agenda  2010  low  pay  low  income  TLTRO  LTRO  monetary  transmission  mechanism  velocity  of  money 
march 2016 by asterisk2a
Beware the Minuses of Negative Interest Rates
Whether sub-zero interest rates actually work is open to debate, however. So says Richard Koo, the chief economist of the Nomura Research Institute. “In my view,” he writes, “the adoption of negative interest rates is an act of desperation born out of despair over the inability of quantitative easing and inflation targeting to produce the desired results.” The failure of the BOJ and the ECB to meet their inflation and growth goals is shared by the Federal Reserve and the Bank of England. None of these central banks understand that their textbook solutions don’t fit the real economy, Koo asserts. [...] And on a more practical level, why corporations sit on record hoards of cash (taxes aside). [<< macro prudential policy ] //&! “When no one is borrowing money, monetary policy is largely useless.” [...] Keynes was right and (Milton) Freidman was wrong. - & There is no Confidence Fairy //&! & & & &
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february 2016 by asterisk2a
Amid market turmoil and confusion, there are four key economic trends shaping society
The UK economy currently gets nowhere near its target of 2%. Inflation would decrease the value of current debts, making them less of a burden. In a world without much inflation, it is hard to get wages up. The worse case scenario is that debt costs increase, as prices and wages stagnate. [ ignoring debt and income growth - stagnation at their peril - - gov is no household budget, Steve Keen + Richard Koo ] [...] And in this age of austerity, these factors will work against governments seeking to reduce the welfare bill. Recent data shows that, in UK cities, growing numbers of low paid jobs have led to rising claims for welfare such as housing benefits, defeating the government’s aims to reduce spending.
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february 2016 by asterisk2a
What The ECB's "Unprecedented" Forward Guidance Means | Zero Hedge
Europe struck in credit crisis - liquidity trap. & other problems - Politics / Brussels - one to mention. >> "The move clearly marks an innovative step in the ECB's communication and policy strategy for a bank that previously had always refused to pre-commit on interest rates." >> Problem is - ECB will have it hard to maneuver out of the measures, end schemes, etc. "Monetary Policy is no Panacea." Ben Bernanke. + >>
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july 2013 by asterisk2a
Charting Europe's Broken Transmission Channels | ZeroHedge
Barclays provides a succinct flowchart of just where those transmission channels are broken. However, with SMP empirically a losing proposition for sovereign spreads, LTROs having had no impact on loans to non-financial corporates, and rate cuts not reaching the peripheral economies (and in fact signaling further divergence); it seems that short of full-scale LSAP (which JPM thinks will need to be a minimum EUR600bn to be in any way effective), whatever Draghi says will be a disappointment and perhaps that explains the weakness in European sovereigns this week as exuberance fades (or is the game to implicitly weaken the EUR to regain competitiveness).

The transmission policy channels of central bank largesse are failing... as giving free money to banks is not reaching the economy... (LTRO) ... and cutting rates didn't reach the areas it needed... (base rate cuts do not translate in rate cuts on the other side [real economy].

A weaker Euro? Be careful what you wish for.
creditcrunch  monetary  theory  unintended  consequences  currency-war  currency  debasement  policy  folly  policy  error  Politics  confidence  trustagent  trust  banking  crisis  bank  crisis  QE  debtoverhang  deleveraging  GFC  greatrecession  2012  sovereign  debt  crisis  MarioDraghi  SMP  LTRO  moneysupply  velocity  of  money  transmission  monetary  policy  System  ECB  PIIGS  Euro  competitiveness 
july 2012 by asterisk2a
Draghi: EZB will wieder Staatsanleihen kaufen und Euro retten - SPIEGEL ONLINE
- Draghi sounded very Fed like; speculation now that they might use SMP non-standard monetary policy tool again.
- also I personally got the impression they want to safe Euro and thus the banking system. But necessarily not Greece. Greece and other problematic sovereigns were not mentioned. If Greece were to exit - they could to another LTRO.
- also analysts speculate that ECB could do something with ESM together in the future.

- Everything else considered; ECB can not solve problems of sovereigns. Actions are only a sedative against the pain and these sedatives (non-standard measures) will be discounted by market over time now faster than the last time.

Within our mandate ECB ready to do whatever it takes to preserve the euro
LTRO  ESM  EFSF  SMP  MarioDraghi  2012  PIIGS  Europe  sovereign  debt  crisis  velocity  of  money  moneysupply  monetary  theory  monetary  policy  System  ECB 
july 2012 by asterisk2a
Relax, central banks can still save us - Telegraph
Military demobilisation allowed an instant cut in the US budget deficit. Today the rot is structural, a failure to stop health care and ageing costs spiralling out of control.

The eurozone obviously needs looser money. M3 broad money is stagnant and real M1 deposits have turned negative, even in Germany and Holland. Real M1 is contracting at an alarming pace in Italy. EMU growth has wilted, five countries are spinning towards default, and the banking system is seizing up. This cries out for a change of course, yet the European Central Bank is still tightening.
USA  debtoverhang  deleveraging  balancesheet  recession  greatrecession  GFC  depression  history  paulkrugman  sovereign  debt  crisis  ECB  monetary  policy  supply  M1  M3  velocity  money  creditcrunch  error  folly  benbernanke  trichet  2011  August  JacksonHole  lesson  greatdepression  fiscal  austerity  europe  UK  presidency  barackobama  davidcameron  angelamerkel  sarkozy  GeorgeOsborne 
august 2011 by asterisk2a
Blog - - Deflation Sets In (USA)
A move by US bank BNY Mellon to charge for depositing cash was perhaps Thursday’s most significant development.
The announcement by the bank that it is preparing to impose negative interest rates on wholesale deposits is a classic sign of deflation.

The imposition by BNY Mellon of negative deposit rates came as US government bill yields hit zero and the rate on overnight repurchase agreements (repos) went below that threshold, according to a report in the Wall Street Journal.
BNY Mellon has seen large inflows of cash from its institutional customers, which it then has to park in assets like T-bills and in secured deposits. If it’s having to pay to do so (via negative rates), it wants to be able to pass this cost on to clients.  If it holds the cash on its own balance sheet, the bank has to pay higher capital charges and extra costs for deposit insurance.
deflation  deflationary  USA  economy  2011  August  PIIGS  sovereign  debt  crisis  UK  debtoverhang  deleveraging  government  QE  ZIRP  inflation  monetary  policy  velocity  supply 
august 2011 by asterisk2a

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