Global Macro Trading Journal

Ralph I can not agree with you. IMVHO Trichet is fighting for the end of the EU, if you look back the European Union was the biggest trick ever considered. The big countries (Germany, France, etc) lived with a currency much more devalued than they would have if not for the EUR (looking at the CHF if there was a Deutsch Mark I bet this would be the most overvalued currency in the mrkt), while the peripheral countries lived with a much smaller interest rate than they would have if not for the EuroZone. This arrangement worked untill people realized the peripheral countries would not be able to pay back the money the got. With debt/GDP exploding only inflation and growth will solve this mess. Growth is loosing it steam and Trichet seems to be concerned only with inflation something that might solve the hole mess.

I do believe the only way to enforce a deleverage for countries and families needed are through inflation. A nominal deleverage will be too painfull for the population and the deleverage in Real Term would fix the mess. Also, I believe the only way for the FED to raise the velocity of money is if Mr. Bernanke announces the FED will pursue (for example) an inflation of 4% p.y. for some years (lets say to 2020) and after that they will drop the inflation target back to 2%....

We are living in unprecedented times, and I believe we will need unprecedented measures to get it through.
 
Quote from Ghost of Cutten:

SNB forex reserves went from 180bn CHF to 250-ish in August (i.e. they added about 40% to their position size). 250bn CHF is about 300bn USD. 10 handle move in one day = about 8%. 8% of 300 is $24bn USD.
More...

We need to coin a new term. Central bank insider trading
 
The SNB move goes to show how the Keynesians like Richard Koo and to some extend Krugman are totally wrong when they claim that monetary policy is impotent due balance sheet recessions/zero bounds, etc.
Their rates are at 0%, yet they were able to decrease their FX rate by 8% in one day, which will almost certainly boost their prices. Money supply should rise as well which should boost NGDP

The only reason Japan has failed in reversing deflation and a stagnant economy(Leading Koo to misguided notions) is because the BOJ is run by idiots
 
Quote from Daal:
The SNB move goes to show how the Keynesians like Richard Koo and to some extend Krugman are totally wrong when they claim that monetary policy is impotent due balance sheet recessions/zero bounds, etc.
Their rates are at 0%, yet they were able to decrease their FX rate by 8% in one day, which will almost certainly boost their prices. Money supply should rise as well which should boost NGDP

The only reason Japan has failed in reversing deflation and a stagnant economy(Leading Koo to misguided notions) is because the BOJ is run by idiots
More...
But Switzerland is not in a balance sheet recession surely? The Swiss situation doesn't imply that Koo is wrong at all, in my view... Their probems can be addressed, to some extent, by monetary mechanisms.
 
Throwing Koo and Krugman into one big 'Keynsian' pigeonhole may be convenient but it's still wrong. The difference between Koo and Krugman is that Koo understands the role of debt and its effect on aggregate demand once private and corporate balance sheets are impaired. Krugman does not.

Krugman's model world like most of his neocassical peers for the sake of simplicity simple assumes one mans debt is another's asset so it makes no difference in economic analysis. That of course is a major fallacy.
 
Quote from Martinghoul:

But Switzerland is not in a balance sheet recession surely? The Swiss situation doesn't imply that Koo is wrong at all, in my view... Their probems can be addressed, to some extent, by monetary mechanisms.
More...

I fail to see how a balance sheet recession would prevent any wiling central bank from implementing changes like the SNB did. Koo seems to be quite dumb for the amount of attention he gets
 
Quote from Daal:
I fail to see how a balance sheet recession would prevent any wiling central bank from implementing changes like the SNB did. Koo seems to be quite dumb for the amount of attention he gets
More...
He's not dumb, IMHO, and his point is valid. Specifically, he doesn't say that a given CB can't do what the SNB did, but rather that, if it did, these measures will be ineffective if its economy is undergoing a particularly acute deleveraging. So in the case of Switzerland monetary policy can be effective and, funnily enough, the same is probably true for Germany. However, it's certainly not the case for the PIIGS, which leaves the ECB in a really hairy situation.

And yes, NOK and SEK are both in a very good shape.
 
Quote from Martinghoul:

He's not dumb, IMHO, and his point is valid. Specifically, he doesn't say that a given CB can't do what the SNB did, but rather that, if it did, these measures will be ineffective if its economy is undergoing a particularly acute deleveraging. So in the case of Switzerland monetary policy can be effective and, funnily enough, the same is probably true for Germany. However, it's certainly not the case for the PIIGS, which leaves the ECB in a really hairy situation.

And yes, NOK and SEK are both in a very good shape.
More...

Whats holding back the PIGS economy is the austerity which they would not have to be going through if they had their central banks to do large amounts of QE, even financing their goverments. Koo seems to imply that monetary policy is innefective in boosting aggregate demand(I believe he claims all the reserves just get hoarded) and fiscal policy is the only way out

Monetary policy would be specially effective during a acute deleveraging because boosting incomes(NGDP) would go a long way towards helping people service debt
 
The only red flag about the NOK is that it seems highly overvalued in a PPP basis. Both in the big mac index and the OECD PPP index(More even than the CHF)

So there is a risk there. But I would imagine in a time like this where capital doesn't know where to go, PPP will matter less. Safety is at a premium
 
You must log in or register to reply here.
Back
Top