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Tag Archives: central banks

Yield curve weirdness

Yield curves have gone mad. Negative yields are everywhere, from AAA-rated government bonds to corporate junk. Most developed countries have inverted yield curves, and a fair few developing countries do too:(chart from worldgovernmentbonds.com)Negative yields and widespread yield curve inversion, particularly though not exclusively on safe assets. To (mis)quote a famous pink blog, this is nuts, but everyone is pretending there will be no crash.Here, for your enjoyment, is an à la carte...

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Why Central Bankers Don’t Understand Inflation

My debut post at CapX develops a theme I have written about many times. Central bankers are tasked with controlling inflation, but they don't understand it. For the last decade, central banks in developed countries have been pursuing policies designed to raise inflation. Quantitative easing, cheap funding for banks, tinkering with yield curves, low and negative interest rates – all aim to raise inflation to the ubiquitous 2% target. Understandably, central banks’ inflation forecasts...

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Inflation Is Always And Everywhere A Political Phenomenon

We don't understand inflation. Those who lived through the high inflation of the 1970s are convinced that inflation is always and everywhere caused by wage-price spirals. Germans, economic Austrians and Bitcoiners are convinced that inflation is always and everywhere caused by central bank money printing. Small-state supporters are convinced that inflation is always and everywhere caused by profligate governments borrowing and spending excessively. Hard money enthusiasts are convinced that...

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10 years after – and nothing has changed.

The following is an interview with Yena Yoon – a financial journalist with Chosen Ilbo “the largest newspaper in South Korea” conducted on 12 February, 2018, but still relevant. What is the most remarkable change in financial market after 2008 global crisis do you see? Why do you think so? The most striking outcome from the global financial crisis of 2007-9 was that there was no structural change to the international financial architecture/system – the system that was at the heart of the...

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What is the Central Bank of Argentina Actually Doing?

Brief note in Spanish (no translation, sorry) on the long history of central banks and the current policies of the Argentinean central bank (BCRA). The gist of the argument is that while central banks where created to finance developmental states in the nascent merchant capitalist societies, in the periphery they tended to follow the Victorian model (implemented later) emphasizing inflation control as the main official goal. However, often, as in the recent case of the BCRA, they are used...

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The currency market has run on Mnuchin and Draghi

By Marc Chandler (This post first appeared at Marc to Market) ECB President Draghi was unable to arrest the US dollar’s slide and euro’s surge.  But he did not try particularly hard.  While many investors are a bit stumped by the pace and magnitude of the dollar’s slump, Draghi seemed to imply that it was perfectly understandable given the recovery of the eurozone economy.  The economy is the strongest it has been in more than a decade, but the US is no slouch.  The US reports the first...

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Will Bank of England raise interest rates in 2018?

The Financial Times asked economists the following: How far will the Bank of England raise interest rates next year? Do you think they should? PRIME economists responded in this way: We think much will depend on the Federal Reserve and the ECB. The BoE will follow both, but will have time to assess the impact of global tightening. We do not think that rate rises would be wise at a time of weak demand, low productivity and heavy corporate and consumer indebtedness. Thanks to austerity,...

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Money creation in a post-crisis world

As many of you know, I have spent much of the last seven years explaining to anyone who will listen that banks do not "lend out" deposits or reserves. Rather, they create both loan assets and matching deposit liabilities "from nothing" by means of double entry accounting entries. Creating money with a stroke of the pen (or a few taps on a computer keyboard) is what banks do.But this does not mean that the money that banks create comes from nowhere. It doesn't. It is only created when they...

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Central banks’ credibility problem

In a speech in London the other day, Peter Praet discussed the ECB's unconventional policy measures. I was there, and I have to say that he deviated considerably - and rather entertainingly - from the version of the speech on the ECB website. But his core message was still the same: "Rates are expected to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases. So, no interest rate hikes for a long time to come.But that's not what...

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