Excess Reserves

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The Unintended Consequences Of 'Lift-Off' In A World Of Excess Reserves





In the short run this will probably lead to dramatic and unexpected change in financial flows. Over the longer run, a much-overlooked problem emerges. Simply put, it is highly unlikely that market rates will respond as the Fed moves its target rate upwards; in this case, the FOMC will have lost all control.

 
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They're Coming For Your Cash





It’s easy to be frightened by these proposals. But if governments think they can force us to accept negative interest rates on our savings by abolishing cash, they need to think again. It’s preposterous to assume that savers will passively accept outright confiscation of their assets via negative interest rates or a ban on cash. Instead, people will simply revert to other stores of value.

 
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In "Permazero", Fed's Bullard Admits US May Be Entering Permanent Period Of Lower Inflation And Interest Rates





The most important thing Bullard said in his speech titled "Permazero" is that the the US may be entering a permanent period of lower inflation and interest rates. Wait, wasn't ZIRP and QE supposed to push the US economy, boost inflation and hike rates? Good to know 7 years later that the biggest monetary experiment in history did precisely the opposite of what it was supposed to achieve.

 
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How The Easy-Money Boom Ends...





The funds have flowed in a torrent into stocks, bonds, and real estate, just as 1940's NY Fed President Allan Sproul predicted. That flood of easy-money created the delta of plenty in which we live today. Unfortunately, it’s not likely to continue, because funny things happen when you do funny things to money.

 
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AsiaPac Calm Before BoJ Storm, Japanese Household Spending 'Unexpectedly' Drops As China Releveraging Continues





As all eyes, ears, and noses anxiously await the scantest of dovishness from Kuroda and The BoJ tonight (despite numerous hints that they will not unleash moar for now), the data that was just delivered may have helped the bad-news-is-good-news case. Most notably Japanese household spending dropped 0.4% YoY (with tax hike issues out of the way) missing expectations by a mile as the 'deflationary' mindset remains mired in Japanese heads. AsiaPac stocks are hovering at the week's lows unable to mount any bid as China fixed the Yuan notably stronger and instigated a new central pricing plan for pork prices (which suggests concerns about inflation domestically). Once again Chinese margin debt reaches a new 8-week high as 'stability' has prompted releveraging among the farmers and grandmas.

 
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We Now Have An ETA When The Biggest Bond Bubble In The World Will Burst





"On the current trajectory, we doubt the market can stay stable beyond a few quarters, especially if some SOE and/or LGFV bonds indeed default."
- Bank of America

 
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QE vs Negative Rates: A Cost-Benefit Analysis Of The Monetary Twilight Zone





Since either NIRP, or QE, or most likely both, are about to cross the Atlantic and make landfall in the US before the Fed is forced to launch the monetary helicopter, those who want to know what is really coming - no, not rate hikes - are urged to read this.

 
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"The Bankers Have Gone Through This Before. They Know How It Ends, And It’s Not Pretty"





Oil companies have sold $61.5 billion in stocks and bonds since January as oil prices have tumbled. However, the fees geneated are a tiny fraction of the bank's real exposure to the energy sector, at over $150 billion. So have the banks learned their lesson?  "The bankers have gone through this before,” says Oscar Gruss’s Meyer. “They know how it works out in the end, and it’s not pretty." Then again, perhaps banks are just sailing on an ocean of liquidity allowing them to postpone the day of Mark to Market reckoning, especially since this time, everyone is in it together....

 
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The Mindless Stupidity Of Negative Interest Rates





"...pushing rates into negative territory works in many ways just like a regular decline in interest rates that we’re all used to." That’s false - Negative interest rate proponents ignore the basic tenets of double entry accounting. We know that it is categorically false the negative rates are working in Europe. So what has happened to European bank deposits since the ECB instituted negative rates? They have shrunken. Has one single mainstream economist or proponent of negative rates mentioned that, ever? I suspect not. But facts have a way of eluding mainstream economists and central bankers.

 
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"How Will The Public Receive News Of More QE, NIRP, Cash Bans And Capital Controls?"





"We believe the US will be in recession before the end of 2016 and then things will be really interesting. How will the public receive news of more QE, NIRP, forward guidance, cash bans and capital control in a time when faith in central bank omnipotence disappears?"

 
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"There Are Five Times More Claims On Dollars As Dollars In Existence" - Why This Matters





According to the Fed, there is about $60 trillion of US Dollar credit or claims for US dollars. Also according to the Fed, there are about $12 trillion US dollars.  So, the data show plainly there are five times as many claims for US dollars as US dollars in existence. Does this matter to investors? Well, yes, it matters a lot.

 
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Low Interest Rates Cannot Save A House Of Cards





While the Federal Reserve has chosen to keep the Federal Funds rate near zero, it is merely delaying the inescapable and inevitable result of its own monetary policy – another needed economic correction that its actions will have generated but which it will, no doubt, blame on the supposed “failures” of the market economy.

 
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