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Fed, ECB Throwing World Into Chaos?
Walter Brandimarte of Reuters reports, Fed, ECB throwing world into chaos: Stiglitz:
Ultra-loose A "The irony is The That flow of dollars Recent actions by those countries to curb the strength of their currency were "necessary," Stiglitz added. "It's On The But additional monetary stimulus will "clearly" not solve the problems caused by lack of global aggregate demand, Stiglitz said. "Lowering What we The American I expect some improvements The policy remains reflate & inflate. Some think this will lead to "chaos" but the reality is there isn't much choice. And while Warren Buffett is the latest to warn of a bond bubble, Niels Jensen of Absolute Return Partners wrote an absolutely brilliant piece arguing for lower bond yields, aptly titled Insolvency Too. Mr. Jensen concludes: So what are my conclusions? For all the reasons above, I continue to Another question altogether is, where does this leave equities? I We'll see if interest rates start going up for the "right reasons", but I
monetary policies by the Federal Reserve and the European Central Bank
are throwing the world into "chaos" rather than helping the global
economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on
Tuesday.
"flood of liquidity" from the Fed and the ECB is bringing instability
to foreign-exchange markets, forcing countries such as Japan and Brazil
to defend its exporters, Stiglitz told reporters in a conference at
Columbia University.
that the Fed is creating all this liquidity with the hope that it will
revive the American economy," Stiglitz said. "It's doing nothing for
the American economy, but it's causing chaos over the rest of the
world. It's a very strange policy that they are pursuing."
U.S. dollar has weakened about 6.5 percent against a basket of major
currencies since the beginning of September as prospects for further
monetary easing by the Fed have led investors to seek higher returns
elsewhere.
caused currencies to appreciate in many emerging market countries such
as Brazil, which offers strong growth prospects. The Japanese yen has
also hit record highs against the dollar on expectation of additional
greenback weakness.
natural in that context for them to say -- we can't just let our
exchange rates appreciate and destroy our exports," he said.
Monday, Brazil doubled a tax on foreign investment into local
government bonds, while Japan lowered the target for its benchmark
interest rate to a range between zero and 0.1 percent.
Bank of Japan also pledged to buy 5 trillion yen ($60 billion) worth
of assets, in a strategy similar to the one adopted by the Fed to pump
funds into the economy.
the interest rates may help a little bit, but that's much too weak to
address the problems facing the United States and Europe," Stiglitz
said. "We need fiscal stimulus."
really need to boost aggregate demand is jobs. According to Stéfane
Marion, Chief Economist at the National Bank of Canada, there is scope
for some optimism on the jobs front:
Staffing Association (ASA) reported that its index of temporary &
contract employment rose to a level of 100 during the week of September
26. This means that current employment in the staffing industry – which
tends to be a leading indicator of overall trends in U.S. labour markets
– is back to a level comparable to that of 29 months ago. As today’s
Hot Chart shows (see above), however, the improvement in the ASA index
has yet to be reflected in the official BLS data. This divergence cannot
last. If the past is any guide, we would expect the BLS data to
converge on the ASA index.
in the labor market, but obviously not enough to give a sustained boost
to aggregate demand. As for currency warfare, I think you should all go back to read the comment on the death-defying US dollar. With global ZIRP firmly entrenched, we shouldn't be surprised to see competitive devaluations. I once quipped that the world is heading towards parity, and it seems like central banks are going to throw everything but the kitchen sink to fight the specter of global deflation.
be bullish on bonds. Remember what I said earlier this year about
inflation being difficult to engineer when you need it the most?
Unfortunately, this is truer than ever. We could really do with a bit of
inflation and the higher bond yields which would probably follow (it
would fix an awful lot of problems in the pension industry), but it is
when you need it the most that it is least likely to happen.
believe it will ultimately be the bond market that holds the answer to
when it is time to buy the stock market aggressively again. Long term
readers of this letter will know that I have argued for over 6 years now
that we are stuck in a secular bear market (i.e. a market characterised
by falling P/E ratios). This doesn’t
mean you can’t make money in stocks. Plenty of people do every day. But
you need to be selective. Don’t buy the market yet. It is still
premature. Invest with active managers capable of delivering alpha.
The time to buy the market again will probably be when the bond bull
finally decides to call it a day. There is only one caveat. Interest
rates must go up for the right reasons, but that is a story for another
day.
do agree that you have to be selective in this market. I am less
convinced that pension funds need to pay 2 & 20 for active
management, especially if they have the expertise to do it internally.
But Mr. Jensen is talking up his industry. Can't blame a man for
promoting his livelihood.
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Is it pure coincidence that a self-confessed expert of the great depression is overseeing the next one??
oh, the irony!
Has anyone tried using the USD as toilet paper yet? How does it feel? How well does it flush?
Just curious! I thought I should prepare!
RE: JR, gwar5, and AUD. Yeah, like they said.
"but the reality is there isn't much choice"......really? A Determinist are ya'? How 'bout we let the MoFoes FAIL. Then we give Jaime,Hanky,Timmy, Larry and Rubie etc etc etc ALL Hempen Neckties for Christmas or Hanakah or whatever.....
There's no Order without chaos
http://www.youtube.com/watch?v=AT3uJFlLwH8
Welcome to the "methadone market."
...It ain't as sweet as the MBS junk we used to shoot, but it'll still getya high.
"Ultra-loose monetary policies by the Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday."
"Lowering the interest rates may help a little bit, but that's much too weak to address the problems facing the United States and Europe," Stiglitz said. "We need fiscal stimulus."
These two statements are contradictory. Who the hell does he think is providing the backstop bid in the government bond market if not the central bank.
This guy is a class A fuckhead, along with the likes of Micheal Hudson & Ellen Brown.
Stiglitz is losing it.
He's a Nobel prize winning SOCIALIST economist and has been awol on economic White House team without contribution except to say last year unpolitic, but truthful, that 10% unemployment was on the horizon "years"
"Lowering the interest rates may help a little bit, but that's much too weak to address the problems facing the United States and Europe. We need fiscal stimulus." – J. Stiglitz (Stiglitz, a socialist, also said on October 2, 2008, that it was essential for the US Congress to bail out Wall Street’s bad debts with $700 billion of the public's money and ask questions later.)
More government stimulus spending is not going to fix this economy, unless it’s done by cutting taxes for the middle class.
The crisis is financial sector related, not economic. We don’t need these financials; they are of a superfluous ingredient that has tried to make itself necessary, weaving in and out and entangling the world’s economies, while creating instruments, laws and regulations trying to make themselves indispensable. Yet they are nothing but a barricade between people trying to do business with one another. They are a parasitic enemy that takes your money and gambles with it and when they win they keep it and when they lose they come and get more from you to pay their debts.
In the verdict in the case of Jerome Kerviel, instantly the French people reacted with outrage, identifying Kerviel as one who was forced to take the fall for his bank superiors who clearly allowed his trades, probably on the chance that they would generate income. One newspaper headlined the verdict: Goliath Slews David.
NPR’s reporter from France said that the order requiring Kerviel to repay the $6.8 billion trading loss on his technology consultant salary was the main point of the outrage expressed by the French people she interviewed. The French consider it vindictiveness by the court; that it wasn’t a just ruling. And, they believe, the court apparently is in the pocket of the bankers.
Kerviel plans to appeal, she said, but he’s already won in the court of French public opinion.
Backlash a coming?
off topic. Leo ... I'm new to Zero Hedge and saw an exchange that pointed out that you were ill. i wish you well.
BOJ dropped their interest rates and the global equities markets took off like a scalded hound, what does that tell you, what does that tell you?
it says there are some bad ass companies out there ready to "play pool with the planets." i'm voting for them come November. In fact i'm thinking of "voting early."
my grandfather will be voting, and he's been dead for some time now.
THIS ONE IS EASY. IS IT NOT OBVIOUS YET TO ALL THAT THE FED IS SCARED WITLESS OF THINGS PERHAPS UNKNOWN TO US MORTALS? WHAT ELSE COULD POSSIBLY EXPLAIN THE DESPERATE MEASURES AND PROMOTION OF MORAL HAZARD ON THIS ROAD TO HELL WHICH HAS BEEN PAVED WITH GOOD INTENTIONS?
In some ways, and it's not an excuse, but they have no choice. Deflation will collapse the system. Why not throw one last Hail Mary pass? It'll collapse one way or another...
True enough. The secondary result has been a transformed stock market that is not fathomable by ordinary means.
Ohhhhh I don't know...could it be trillions in losses of bank loan and sovereign bond losses.
Just wait until Nov 3rd: Ben Unleashed. Stock markets shoot up, commodities soar.. and the rest of us serfs simply pay more for food and gas. The coming gridlock in D.C. will certainly hamstring any more bailouts or stimulus. Ray Dalio's prediction of rising commodities, sinking real estate prices, and increasing misery and unemployment has arrived. Welcome to "beggar thy neighbor".
...or "shoot they neighbor attempting to rob you".
This is the same Joseph Stiglitz who in a famous youtube clip told Hugh Hendry that the U.S. never has to worry about default because it can just print as much as they want? What's the matter Joe baby? They're just revving up those consequence free printing presses like you suggested.
I might trust Hugo Stiglitz from Inglorious Basterds more than Joe Stiglitz.
As for printing, there are more than a few economists that believe we live in an MMT world - where the US Government can spend money into existence. They do NOT account for the fact that the Fed is a privately-held institution. In our current circumstances the UST must borrow FRN's from the Fed before it can spend on behalf of the government.
It does not have to be this way. The US could issue its own currency without borrowing. That would be MMT. We do not follow MMT.
Exactly, Fred. From your comment, I can tell you're not one of the brain-dead fools who "junked" my entry at the top of this thread.
And for the record, the first "junk" on this particular comment was my own.
to call this analysis of Professor Steiglitz simplistic is of course simplistic. For the record i didn't junk you but I will say this: the professor called it "odd" and I agree. policies such as this show a lack of confidence--a kind of "talking down" of the economy if you will which causes the problems you are claiming to try and prevent. if it were me i would simply "shut my pie hole" and leave it at that. "chatty bankers" are an oxymoron in my family.
loose lips sink ships.
You are a smart fucker Leo.
So, what is the next equilibrium past the collapse of the USD as a reserve currency assuming the FED achieves that?.........
A simplistic anaolgy being breaking the sound barrier in flight..........and flight may be the right word.......as the dollar breaks it in a dive.
Solar panels, made in China, are going to be the next global reserve currency. (writer sticks out tongue and makes raspberry sound)
Turd called it.........retail to buy into the POMO.........EASY MONEY.
i don't know why you were junked for that, Turd. i laughed out loud. funny shit, man. thanks. :)
I was going to start this with "Look, Leo" but then I remembered that's how Larry Summers always talks--leaning at you with his finger pointing--"Look"!
It's a bad character trait, common among macroeconomists with delusions of grandeur.
Anyway...here is the thing: the Big Policy Call of 'no bond haircuts' remains the elephant in the room. If we would let the blood run, we could get through this. Failing that, it's a Lost Decade, at best. Check out Bill Gross' latest comment at Pimco if you don't believe me. Zero real return is now a good assumption, so savings rates need to go up another 10%, reducing GDP, and then the state finances and other assorted horrors, along with the slow eternal bleed from the zombified financial sector, do the rest.
My question to you, since you are an active researcher, is this: Is there a way, never honestly explained to the public, in which this might actually make some sense? Specifically, would widespread bond writedowns cripple or collapse the life and especially the health insurance industries? In the US, such an event could take out the entire health care system. Pensions would be an afterthought. I put this to Reggie Middleton and he said it's a great question and he doesn't know the answer. I put it now to you. If the invested premium cash goes ker-blooey, what happens to the insurance industry?
In all of this crazy toxic mess of a bond market (and we both know the equity markets are just useless appendages at this point), that is the only rationale I can come up with that makes a lot of sense. Other than, you know, apocalyptic corruption that is willing to take down the entire system rather than take a haircut.
Hope you're doing well these days.
It doesn't look good under any circumstanes:
i will answer it for you. first off there are no problems in the treasury market to date so calling it "a bubble" should i think be very much construed as irresponsible. the volumes in that market are tremendous and i think the burden of proof is on those who keep claiming "monetization" to "show us where and how it can possibly be impacting this trillion dollar money making machine" which has had a fantastic year. i do think it responsible to say "there is a wide latitude between a bid and an ask" in this market and i'll leave it at that. to answer your question however there are many entities if not entire countries that use treasuries as the "equity" upon which they borrow. even if we have a massive sell off in treasuries that will not change though the borrowing expense certainly will. since all insurance products are bought "up front" and paid out "at a later date" many assumptions (done by people called actuaries) are made in order for the product to be declared "solvent." you hear of investigations of accounting firms but never of actuaries. there is a very powerful reason for this in my view but i'll let you research "actuaries" first and see if that "makes you curious and keeps you digging."
When certain types of citizens figure out just what the hell is going on, Bernanke and Co had better hope they have the latest form of armored vehicles and they remember to avoid alleys and hot tubs.
US citizens will do no such thing. No anger, no retribution. There will be no fun for those who want so bad to view Bernanke and Sons through their vicarious schadenfreud. Watch the beaten citizen wife turn the cheek over and over again.
It is Bernanke that will hold the whip, dressed in garter belts, bitch slapping the public back into their deserved and submissive role.
Makes we want to fck'n puke.
Remember Frank Booth in Blue Velvet?
http://www.youtube.com/watch?v=5_5sQyHnbY4
That's our man, Ben.
hot tubs? that's a bummer. dark alley's for sure...but we like hot tubs. let us not fear "death by hot tub."
Didn't work for Matt Simmons.
Taking comments from an economist of a Canadian bank for US, European & Asia events? Leo WTF
This looks like a run on the Dollar. Japan is injecting money to equalize exchange rates, making it easier to dump the Dollar. Other countries are doing much the same thing. Everyone's running for the exits.
Combine the currency interventions (Dollar dumping) with the massive increase in insider selling for a full picture of the impending disaster. Of course, the weekly flash crashes in various stocks are part of the massive insider selling.
Then look at the huge increase in the price of crude oil and precious metals during the past few weeks.
The warning lights are flashing red. So, today's stock market rally shouldn't make anyone happy. It should scare the hell out of everyone.
you need to define "the end" better. all i would say is "saying it does not make it so."
Couldn't agree with you more. Getting closer to the end I'm afraid. I think Bernanke will make a wrong move soon & that will be it. End game. The only question now is, will it happen before or after the election?
Timing it exactly will be tough. All I can say is that I'm stocking up on canned goods for the inevitable supply chain disruptions.
Stiglitz is a dope who is correct about as often as a broken clock. In this instance, however, he gets it right but he doesn't go far enough.
We are at the end. Sort of like birth pangs, everything is speeding up as we near the finish.
Hey, Turd. There is an escape method that is intriguing.
This is worth a look:
Who is John Galt?Possible. But if the Fed tried to re-assert control in a collapse, there might be a few people that would openly revolt. ;)
I think open revolt in the U. S. is unlikely.
Perhaps a political revolt? Definitely possible!
Begs the question, how many more drugs can they throw at this pregnant, about to burst bitch to fend of the pain? You may proceed to room 24 for your daily dose of Oxycontin
I'm pretty sure they use Pitocin (Oxytocin), not Oxycontin, for pregnant chicks.
But maybe you're in Florida.
Pitocin induces labor by starting brutal, involuntary contractions from hell. I don't think they administer it unless they think the delivery is progressing too slowly.
Oxycontin is an opiate pain killer, and I don't think it is used in vaginal birth. The last think you want to do is weaken the muscle contractions with an opiate. And I think the opiates mess up the infant, too (crossing the placenta and all that).
I don't know what they use for C-sections, anesthesia-wise.
--mamba-mamba
Stiglitz' mental meconium will be washed away when the baby has been aborted.
There can be NO appreciable rise in interest rates. Debt service payments would balloon, house prices would decline (all other things being equal), and all those newly printed bonds would decline in value. ZIRP is a trap. The Fed is painted in a corner.
They have executed their thievery with brilliance and cunning - all in broad daylight. The greatest scam of the century - all with the complicity of the government and the tacit approval of the citizens. Well done, well done, Ben, Al, bankers, et all...
how are "the banks in on it?" if by it you mean "an inflation"?