Central Banks Fight to Ensure Crisis Tools Become the Norm

[Banjo]

Unconventional tools deployed by central bankers from Frankfurt to Washington to mitigate the economic fallout of the financial crisis may be conventional when the time comes to combat the next downturn.

http://www.bloomberg.com/news/artic...ght-to-ensure-crisis-toolkits-become-the-norm

 

[schizo]

Unconventional tools deployed by central bankers from Frankfurt to Washington to mitigate the economic fallout of the financial crisis may be conventional when the time comes to combat the next downturn.

http://www.bloomberg.com/news/artic...ght-to-ensure-crisis-toolkits-become-the-norm

Welcome to the new era of Stagflation!

 

[NoVoodooHere]

Surely, it's different this time

 

[freedinner]

How can they fool themselves into believing that QE has been a success (and thus demand more of it) before they have even start to run off the purchased MBS and bond holdings?

Maybe all QE did is pull forward demand?

It's like a cyclist who starts at the top of the mountain, taking the easy route only downhill, and crows about his speed reached.

 

[NoVoodooHere]

^ No free lunch?

....Banish the thought!

 

[Nine_Ender]

How can they fool themselves into believing that QE has been a success (and thus demand more of it) before they have even start to run off the purchased MBS and bond holdings?

Maybe all QE did is pull forward demand?

It's like a cyclist who starts at the top of the mountain, taking the easy route only downhill, and crows about his speed reached.

QE was a success, there was no Depression or even a prolonged Recession. 6 years later and some of you still can't drop the doom and gloom narrative, it's getting pathetic. You can argue about the relative merits of the success, about how well the process is managed now, but there s no doubt at all that the original program was a success.

 

[NoVoodooHere]

QE was a success, there was no Depression or even a prolonged Recession. 6 years later and some of you still can't drop the doom and gloom narrative, it's getting pathetic. You can argue about the relative merits of the success, about how well the process is managed now, but there s no doubt at all that the original program was a success.

This is your opinion, it is not a fact. It is my opinion that you are divorced from reality, but then again I am not able to see the smashing up-cycle that you seem to be under the impression we are experiencing.

 

[freedinner]

QE was a success, there was no Depression or even a prolonged Recession. 6 years later and some of you still can't drop the doom and gloom narrative, it's getting pathetic. You can argue about the relative merits of the success, about how well the process is managed now, but there s no doubt at all that the original program was a success.

1) Maybe you are equating QE with the whole crisis response?

Of all the emergency measures, ZIRP, bank bailouts, TARP and all the other lender of last resort programs even to companies like GE, and the massive fiscal deficits during the recession, even the Fed thinks that QE had by far the smallest impact but the largest cost.

2) QE alone is not sustainable. That is my point. It cannot consist without QF (quantitative firming) in the end, as the purchases will have to be unwound or run off. Therefore you cannot call QE a success before you haven't found out what the negative effects of the associated QF are.

If you really think that QE single-handedly saved us from a great depression, I would be very worried about the coming QF.

Or do you seriously think that the Fed can expand its balance sheet in perpetuity?



In the end, QE is another form of debt that will have to be repaid. So the whole thing is in effect a question of generational fairness. If you decide to borrow from your future to consume today, that's fine. But what we in essence are doing is to borrow now and tell the bank to collect from our not-even-born-yet grandchildren.

 

[Nine_Ender]

1) Maybe you are equating QE with the whole crisis response?

Of all the emergency measures, ZIRP, bank bailouts, TARP and all the other lender of last resort programs even to companies like GE, and the massive fiscal deficits during the recession, even the Fed thinks that QE had by far the smallest impact but the largest cost.

2) QE alone is not sustainable. That is my point. It cannot consist without QF (quantitative firming) in the end, as the purchases will have to be unwound or run off. Therefore you cannot call QE a success before you haven't found out what the negative effects of the associated QF are.

If you really think that QE single-handedly saved us from a great depression, I would be very worried about the coming QF.

Or do you seriously think that the Fed can expand its balance sheet in perpetuity?



In the end, QE is another form of debt that will have to be repaid. So the whole thing is in effect a question of generational fairness. If you decide to borrow from your future to consume today, that's fine. But what we in essence are doing is to borrow now and tell the bank to collect from our not-even-born-yet grandchildren.

Monetary policy involving debt has been a staple of Western governments for many decades. In terms of troublesome situations, Canada in the 1980s had the worse combination of rising debt, high interest rates, and high inflation. The doom and gloomers had a hey day back then, but in the 1990s all those factors mellowed out and the Canadian economy did fairly well. I don't expect Americans can relate to this example, but I lived with very high taxes when on company payroll.

Generational fairness is a totally different topic, we probably agree on this. Fairness across income groups is at all low in the US right now. Too many Americans believe a hands off capitalistic system will solve all problems, and any look at the sub prime fiasco or your health care system knows it's not working.

A big part of the solution is higher taxes for Americans, not a popular aspect but inevitable. Other aspects include a more responsible role as a world ambassador ( e.g. no unnecessary wars ), and claw backs on financial rules that favour rich people.

 

[Nine_Ender]

This is your opinion, it is not a fact. It is my opinion that you are divorced from reality, but then again I am not able to see the smashing up-cycle that you seem to be under the impression we are experiencing.

If you are American and believe your economy is going to pieces, fine, that is the reality you believe in. Doesn't impact on my reality as a Canadian all that much. We're not running large government debt these days, our tax bills have dropped the last 15 years, there was no banking crisis or housing crash in Canada at any point. Perhaps the US had it too good for decades and it's a cyclical correction on your economy and it's excesses. Maybe Canadians are already used to the challenges that some Americans are facing this decade.

My guess is that Americans are wealthy enough to easily solve the debt issues with taxation and fairer rules; if you don't get it done is more of a political or greed issue then anything.