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Posts Tagged ‘Das’

IWF entdeckt Schattenseiten der Globalisierung

Posted by hkarner - 20. April 2017

András Szigetvari aus Washington, 20. April 2017, 07:15 derstandard.at

Der Streit um Globalisierung, Freihandel und Ungleichheit dominiert Wahlkämpfe in Europa und den USA. Nun springt der Währungsfonds auf das Thema auf

Washington – Von ihrem kleinen Büro an der 19th Street in Washington, D.C., hat Mitali Das in den vergangenen Monaten die Revolution vorbereitet. Die Ökonomin arbeitet für den Internationalen Währungsfonds (IWF). Sie sammelte Daten aus dutzenden Ländern. Ein Team unter ihrer Leitung führte die Kalkulationen durch, jedes Ergebnis wurde penibel nachgeprüft. Fehler durften nicht passieren, dafür war die Materie zu heikel. In einer soeben publizierten Studie ist Mitali Das der Frage nachgegangen, wie sich globaler Handel und technischer Fortschritt auf Einkommen und Einkommensverteilung ausgewirkt haben.

Wo der IWF in dieser Frage ideologisch steht, ist klar: Jahrzehntelang haben die Experten des Fonds gepredigt, dass Liberalisierung und Marktöffnung der beste Weg zu mehr Wohlstand für alle sind. Ungleichheit und Verteilungsfragen spielten in diesen Überlegungen keine Rolle. Die Arbeiten von Das, einer indischstämmigen ehemaligen Professorin an der Columbia-Universität, haben das verändert.


Die Ökonomin und ihre Kollegen haben sich angesehen, wie sich der Anteil der Arbeitseinkommen im Verhältnis zur Wirtschaftsleistung (BIP) entwickelt hat. Unter die Lupe genommen wurde die Entwicklung dieser Lohnquote in 50 Ländern seit 1991. Das Ergebnis: Weltweit erhalten Arbeiter und Angestellte heute in der Mehrzahl der Länder einen geringeren Teil vom erwirtschafteten Wohlstand als zu Beginn der 1990er-Jahre. Auf Kapitalerträge dagegen entfällt ein größerer Teil des Kuchens. Den Rest des Beitrags lesen »


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The Coming Italian or French Phases of Europe’s Economic Crisis

Posted by hkarner - 16. Februar 2017

By on February 13, 2017  RGE EconoMonitorDAS 2

While the near term focus is political, the French and Italian election, any new government will face a series of problems that cannot be easily resolved, even if there is the will to tackle the political and economically difficult issues.

The Unthinkable…

Defenders argue that Italy and France are large modern nations, with enviable economic pedigree. Italy and France are amongst the largest economies in the world.

Gross domestic product (“GDP”) per capita in 2015 is estimated at around US$35,000 and US$43,000. They have large populations, well-educated and productive workforce, well developed infrastructure as well as considerable economic and social capital. Both countries are major agricultural and industrial powers, strong in advanced technical products, luxury goods, food processing, pharmaceuticals and fashion. Both are major exporters and significant tourist destinations. France even has a favourable demographic outlook, with a birth rate just above replacement level mainly among its immigrant population. They are simply too large to fail. Den Rest des Beitrags lesen »

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Crash Course Part 3: The Age of Stagnation?

Posted by hkarner - 15. September 2016

By on September 14, 2016  RGE EconoMonitordas

There are now three possible scenarios for the global economy and financial markets.

The first is the Lazarus economy, where the strategies in place lead to a strong recovery.

The US leads the way. Europe improves as the required internal transfers and rebalancing takes place with Germany accepting debt mutualisation to preserve the Euro. Abe-nomics revives the Japanese economy. China makes a successful transition from debt financed investment to consumption. A financial crisis in China from the real-estate bubble, stock price falls and massive industrial overcapacity is avoided. Other emerging economies stabilise and recover as overdue structural reforms are made. Growth and rising inflation reduce the debt burden. Monetary policy is normalised gradually. Higher tax revenues improve government finances. There is strong international policy co-ordination, avoiding destructive economic wars between nations. Even a new, Bretton Woods-like international financial structure may be agreed. Den Rest des Beitrags lesen »

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Crash Course Part 2: Crisis Triggers

Posted by hkarner - 14. September 2016

By on September 12, 2016 , RGE EconoMonitor DAS 2


There are a number of potential triggers to a new crisis. The first potential trigger may be equity prices.

The US stock market runs into trouble. A stronger dollar affects US exports and foreign earnings. Emerging market weakness affects businesses in the technology, aerospace, automobile, consumer products and luxury product industries. Currency devaluations combined with excess capacity, driven by debt fuelled over-investment in China, maintain deflationary pressures reducing pricing power. Lower oil prices reduce earnings, cash flow and asset values of energy producers. Overinflated technology and bio-tech stocks disappoint.

Earnings and liquidity pressures reduce merger activity and stock buybacks which have supported equity values. US equity weakness flows into global equity markets.

The second potential trigger may be debt markets. Heavily indebted energy companies and emerging market borrowers face increased risk of financial distress.

According to the Bank of International Settlements, total borrowing by the global oil and gas industry reached US$2.5 trillion in 2014, up 250 percent from US$1 trillion in 2008.

The initial stress will be focused in the US shale oil and gas industry which is highly levered with borrowings that are over three times gross operating profits. Many firms were cash flow negative even when prices were high, needing to constantly raise capital to sink new wells to maintain production. If the firms have difficulty meeting existing commitments, then decreased available funding and higher costs will create a toxic negative spiral.

A number of large emerging market borrowers, such as Brazil’s Petrobras, Mexico’s Pemex and Russia’s Gazprom and Rosneft, are also vulnerable. These companies increased leverage in recent years, in part due to low interest rates to finance significant operational expansion on the assumption of high oil prices.

These borrowers have, in recent years, used capital markets rather than bank loans to raise funds, cashing in on demand from yield hungry investors. Since 2009, Petrobras, Pemex and Gazprom (along with its eponymous bank) have issued US$140 billion in debt. Petrobras alone has US$170 billion in outstanding debt. Russian companies such as Gazprom, Rosneft and major banks have sold US$244 billion of bonds. The risk of contagion is high as institutional and retail bond investors worldwide are exposed.

A third possible trigger may be problems in the banking system fed by falling asset prices and non-performing loans. European banks have around €1.2 trillion in troubled loans. Chinese and Indian bank problem loans are also high.

A  fourth potential trigger may be changes in liquidity conditions exacerbate stress. Since 2009, asset prices have been affected by the central banks’ attempted reflation. Today, as much as US$200-250 billion in new liquidity each quarter may be needed to simply maintain asset prices. However, the world is entering a period of asynchronous monetary policy, with divergences between individual central banks.

The US Federal Reserve is not adding the liquidity it did between 2009 and 2014. While the Bank of Japan and European Central Banks continue to expand their balance sheets, it may not be sufficient to support asset prices.

Falling commodity prices also reduces global liquidity. Since the first oil shock, petro-dollar recycling, the surplus revenues from oil exporters, has been an essential component of global capital flows providing financing, boosting asset prices and keeping interest rates low. A prolonged period of low oil prices will reduce petrodollar liquidity and may necessitate sales of foreign investments.

Declines in global liquidity driven by falling petrodollar liquidity and emerging market currency reserves affect asset prices and interest rates globally.

A fifth potential trigger will be currency volatility and the currency wars that are not, at least according to policy makers, under way. A stronger dollar may weaken US growth. But a weaker dollar means a stronger Euro and a stronger Yen affecting the prospects of the Euro-zone and Japan.

A sixth potential trigger may be weakness in global economic activity. One factor will be the weaker energy sector. The belief that lower oil prices will lead to an increase in growth may be misplaced, with the problems of producers offsetting the benefits for consumers. Approximately US$1 trillion of new investment may be uneconomic at lower oil prices, especially if they continue for an extended period of time. When combined with the reduction in planned investment in other resource sectors as a result of lower prices, the effect on economies will be significant.

There are also increasing problems in emerging markets. Growth is slowing as a result of slower export demand from developed markets, unsustainable debt and unaddressed structural weaknesses. For commodity producing nations, lower revenues will weaken economic performance triggering a rerating. The problems will spread across emerging markets.

Slowing growth, low inflation and financial problems will refocus attention on the level and sustainability of sovereign debt. The unresolved public debt issues of Japan and the US will attract renewed investor scrutiny. In Europe, the sovereign debt problems will affect core nations such as Italy and France.

A seventh potential trigger may be a loss of faith in policy makers. A critical appraisal of government and central bank policies and find them wanting. The artificial financial stability engineered by low interest rates and QE is undermined by concern about the long term effects of the policies and the lack of self-sustaining recovery.

A final trigger is political stress. With existing political elites seen as captured by businesses, banks and the wealthy, electorates are turning to political extremes in search of representation and solutions. The resulting policy uncertainty and inconsistency further suppresses recovery. The geopolitical situation has also deteriorated sharply.

In reality, it will not be a single factor but an unexpected concatenation of events, that result in a financial crisis, driving global contagion and an economic slowdown.


A new crisis will have similarities to and difference with 2008. The problem of crowded trades, where a variety of market participants all have the same basic positions and strategies, and identical risk models will be familiar. The effect of new regulations, ironically designed to minimise the risk of a new crash, and a reduction in trading liquidity will create new problems.

Extra capital, while welcome, does not alter the level of risk but merely who bears it. To recapitalise banks, regulators have approved risky hybrid securities, such as contingent capital and bail-in bonds. These capital instruments will transmit losses in the event of a systemic crisis to insurance companies, pension funds and private investors. Bailing them out may be politically necessary or expedient.

With simpler solutions proving politically difficult, attempts to reduce the risk in the chains of derivative contracts have focused on Central Counter Parties (CCPs), a theoretically bankruptcy proof guarantor of transactions, and collateral. CCPs have added complexity, creating new nodes of concentration and instability. CCP risk management is unproven under conditions of stress.

The reliance on collateral is likely to prove troublesome under conditions of real stress. The emphasis shifts from the borrower or counterparty’s creditworthiness to the collateral creating different risks. Government securities now are not risk free. It assumes liquid markets for the collateral, which must be realised in case of default.

Unexpected changes in the amount of collateral needed create liquidity risks. Collateral use also entails significant modelling, operational and legal risk.

Trading liquidity in markets has also diminished markedly since 2008. Traditionally, market makers act as shock absorbers in periods of stress allowing investors to readjust portfolios at a price. But consolidation, through bankruptcies, mergers or acquisition or withdrawal, has reduced the number of dealers. Higher capital charges and specific prohibitions on trading, such as the Volcker rule or narrow banking, have increased the cost of trading.  The amounts that can be transacted without moving prices materially have fallen meaning shocks will be rapidly transmitted.

The decline in liquidity is exacerbated by the changing structure of many markets. There is increased participation by high frequency traders (“HFT”), retail and private investors either directly or through funds. Paralleling the decline in the number of dealers, the number of major asset managers through whom these funds are deployed is small.

The combination of size, the nature of the underlying assets and the redemption feature may prove especially toxic. It is simply not possible to transform highly illiquid instruments, using financial engineering into liquid equivalents.

This lack of liquidity is not reflected in pricing, with the premium for liquidity risk in most segments having fallen to 2007 levels of below.

As the following scenario outlines, these changes in market structure are likely help to create instability in any new crisis.

The key drivers will be higher liquidity reserves for banks, more stringent calculations of risk in derivative transactions and use of government securities to lower capital requirements as collateral. Given pre-existing exposures to government bonds via repurchase transactions, investments or trading inventories, the regulations increase bank exposure to sovereign bonds. This coincides with the deterioration in the quality of government securities and unprecedented low rates driven by policy, creating a dangerous source of instability, which will feed market volatility and transmit losses across different markets.

Where rating downgrades or deteriorating credit quality result in falls in the value of sovereign securities, banks suffer losses on their holdings. Where the securities are used as surety for funding or derivatives, banks need to lodge additional collateral, draining liquidity from markets. The deterioration in a sovereign’s credit quality will affect risk calculations, requiring additional capital as well as collateral.

Banks may hedge this risk, usually by purchasing default protection on the sovereign or shorting government bonds. This will exacerbate losses as the sovereign bonds’ value falls further. Market constraints may necessitate use of proxies for the sovereign, including shorting or buying insurance on equity indices or major stocks. Banks may short sell the currency as a de facto hedge. Proxy hedges transmit the volatility into other asset markets. They create additional risk where volatility is high and correlation between major asset classes becomes unstable, such as in a risk-on risk-off trading environment.

Second round effects focus on the financial position of banks adversely affected by losses on government bond investments and reduced ability of the nation to support its financial institution. The increased default risk of affected banks sets of a chain reaction of additional capital charges increase and loss exposures across international active banks who deal with them , requiring further hedging, compounding the negative spiral.

The reduced demand for the affected sovereign’s bonds result in higher funding costs and reduced market access, which is transmitted to banks and other firms in the country. Higher counterparty risk or downgrades may trigger more collateral calls.

Financial market shocks flow through into the real economy, affecting the supply of credit, growth, investment and employment. In turn, this feeds back into further sovereign and financial sector weakness.

The exact sequence of events is unpredictable because of the complexity of transmission pathways. But once these feedback loops start, they are very difficult to control.

© 2016 Satyajit Das

Satyajit Das is a former banker. His latest book is The Age of Stagnation (published internationally as ‘A Banquet of Consequences’ ). He is also the author of Extreme Money and Traders, Guns & Money.

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Crash Course Part 1: The Problems of Overvalued Assets & High Debt

Posted by hkarner - 9. September 2016

By on September 8, 2016  RGE EconoMonitordas

Crash Course Part 1: The Problems of Overvalued Assets & High Debt

 photo: pixabay

In economics and finance, over-valued assets and excessive debt levels generally do not lead to happy endings

Nutty Shares…

Over the last 5 to 6 years, mispricing of assets has reached epidemic proportions.

Global equities prices have increased strongly. Sell side analysts anticipate further gains, arguing that the falls of August 2015 and early 2016 represent a healthy correction. Since 2009, the US equity market has risen strongly with the main market indices having tripled over the period and are now at or near record levels. Euro-zone stocks have reached their highest level in 15 years. Equity market volatility is also low.

The rise is underpinned primarily by financial engineering and liquidity.

US stock buybacks have reached 2007 levels and are running at around US$500 billion annually. When dividends are included, companies are returning around US$1 trillion per annum to shareholders, close to 90 percent of earnings. Additional factors affecting share prices are mergers and acquisitions activity and also activist hedge funds, which have forced returns of capital or corporate restructures.

The major driver is liquidity, in the form of zero interest rates and quantitative easing (“QE”). According to one estimate, over 80 percent of equity prices are supported in some way by QE. Den Rest des Beitrags lesen »

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QE Forever?

Posted by hkarner - 3. April 2016

By on March 31, 2016, RGE EconoMonitor  das

Compounding the problems of ineffectiveness and toxic side effects, current policies cannot be reversed easily, if at all.

Withdrawing fiscal stimulus would lead to sharp slowdowns in economic activity. Reduction in government services and higher taxes accelerates contraction in disposable incomes, especially in an environment of stagnant incomes and uncertain employment. In turn, this leads to a sharp contraction in consumption. Slower growth, exacerbated by high fiscal multipliers, makes it difficult to correct budget deficits and control government debt levels.

This restricts the ability to reverse an expansionary fiscal policy, corroborating Milton Friedman’s sarcastic observation: “There is nothing so permanent as a temporary government program”. 

As government debt grows, financing difficulties trigger a financial crisis or force reliance on the central bank for financing by monetising its debt.

ZIRP and QE policies are also difficult to change. Normalisation of interest rates, reducing purchases of government bonds and reduction of central bank holdings of securities risk financial disruption. Den Rest des Beitrags lesen »

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Europe’s Fake Recovery

Posted by hkarner - 30. Dezember 2015

By on December 22, 2015  RGE EconoMonitor das

Investors were disappointed when they undid the wrapping on the European Central Bank’s (“ECB’s) early holiday present.

The package was not insignificant: a cut in deposit rates by 0.10% from negative 0.20% to 0.30%; an extension of the €60 billion per month bond purchase program by six months (additional €360 billion in liquidity); a commitment to reinvest the principal repayments on its holdings in further bonds; and expansion of the range of securities to be purchased to include regional and local government debt. 

But the market expected deeper rate cuts and acceleration of the rate of purchases. The ECB blamed markets for ‘over-hyping’ expectations. Markets blamed ECB’s recent guidance which promised more aggressive measure. 

Shortly after the announcement, ECB President Mario Draghi found himself the subject of uncomfortable questioning from Lord King, the former head of the Bank of England against a background of derisive audience laughter. Asked why his famous ‘forward guidance’ had failed to move markets, the uncomfortable ECB president could only respond that the words did not have the same effect as his famous “whatever it takes” because “it was not the same words”.

In reality, the rise in Euro-Zone market rates and the Euro will reverse. The increase in US rates will help. Dr. Draghi’s backtracking and subsequent promise for unlimited quantitative easing (“QE”) will mollify investors temporarily. 

But Dr. Draghi’s frequently repeated assertions of success notwithstanding, the necessity for the ECB’s new actions points to the failure of the policy to restore growth or raise inflation.

Europe did avoid a potential double dip recession in 2014. But economic activity remains weak. The Euro-Zone economy has lost momentum, expanding a mere 0.3% in the three months to September of 2015. Worryingly, Spain and Portugal slowed. Finland and Greece contracted. Italy and France remain weak. Real GDP remains below the level of 2008. Unemployment is around 10.7%, down from a high of 11.5%. It remains above 20% in many weaker economies. Inflation is near zero, although above the record low of -0.70% of July 2009.

The improvements are cyclical, the effect of low oil prices and the relaxation of fiscal policy as the European Commission has turned a blind eye to the failure by members to adhere to prescribed budget deficit targets. France and Italy in particular have openly flaunted budget targets. France even used the attacks in Paris to muse about invoking emergency or exceptional circumstances provisions to increase spending.

The ECB’s program has benefitted Europe primarily through the weakening of the Euro to improve competitiveness. But the improvement in European exports may be unsustainable. 

First, weakness in emerging markets affects around 25% of Euro-Zone exports with the greatest effect on Germany, France, Italy and Spain. China’s slowdown and rebalancing towards services and consumption will be detrimental to European exports of capital goods. Second, the Euro-Zone has a current account surplus of 3.7% of GDP, the largest in the world. This is unsustainable because it is fuelled by insufficient domestic demand and high unemployment. It requires trading partners to run equally large current account deficits. Other nations are unlikely to accept European neo-mercantilism and continue to indefinitely absorb European surpluses. 

ECB actions do not address crucial issues. Debt levels remain elevated and, in some case, are increasing. New lending has not recovered. 

Lack of demand rather than liquidity limits new lending. In addition, euro interest rates for companies and households remain relatively high, around 2%, despite government and inter-bank rates being negative. 

Another constraint is non-performing loans (NPLs) which total €1-1.2 trillion (9% of GDP), a doubling since 2009. NPLs are high in weak economies, such as Italy, Greece, Portugal, Spain and Cyprus, and concentrated amongst small and medium-sized enterprises (SMEs), responsible for two-thirds of Europe’s output and employment. The ECB’s measures are making the problem worse by allowing zombie companies that need to be restructured and debts written off to continue to operate. It is also reducing bank profitability, making it more difficult to write down NPLs.

Internal financial imbalances, evidenced by Target 2 balances, have begun to deteriorate. The fundamental problems of the single currency and uniform monetary policy remain unresolved. Finland is scheduled to hold a parliamentary hearing into continued membership of the Euro shortly. The British referendum on its membership of the EU is scheduled for 2017.

Despite Dr. Draghi’s insistence of the unlimited extent of his powers, the ECB is likely to face increasing constraints on its freedom of action. The recent weaker than expected actions in December 2015 may reflect divisions with the Governing Council, where German, Dutch and other members are known to oppose greater activism. 

The ECB also faces practical limits. It will increasingly find it difficult to execute bond purchases as it runs up against its single issuer and concentration limits. The ECB can only purchase government and agency debt at negative yields above the deposit facility rate (currently minus 0.30%). With an increasing proportion of government bonds trading at ever lower yields, the available universe of bonds may shrink. 

The ECB also faces external pressures. Negative deposit rates have triggered large capital outflows, around €500 billion, helping depreciate the value of the euro. This increases Euro-Zone exporters’ share of global demand. It does not increase the Euro-Zone’s contribution to global demand growth. This beggar-thy-neighbour policy is unsustainable and will intensify the currency wars that Dr. Draghi insists is not taking place. 

Continued weakness in commodity prices and over-capacity in many industries mean disinflationary or deflationary pressures will persist, making the ECB inflation target unattainable.

Problems of refugees, terrorism, Russian revanchism and domestic political tensions (in Germany, Portugal, Spain, France and Greece) also increase uncertainty and reduce business and consumer confidence. European decision making processes remain at best slow and at worst moribund. The debt crisis exposed a North-South divide. Now, immigration pressures have revealed West-East differences. The option of greater integration has stalled. Europe-wide public finances, banking and government have become less not more likely. The spat over immigration threaten the Schengen Treaty, which would mark a major policy reversal. Domestic political pressures in Greece, Portugal, Spain, Italy, France and Germany are increasingly problematic.

Against this background, any improvement in Europe is more cyclical than structural. In the final analysis, the ECB’s action will, at best, maintain for a limited time an uneasy equilibrium. It will promote false hopes for a timely Euro-zone recovery. But as Sigmund Freud observed: “Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces”.

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Interest Rate Policy Uncertainties

Posted by hkarner - 4. Dezember 2015

By on December 2, 2015  RGE EconoMonitordas

Since Lehman Brothers left the mortal coil, there have been more than 600 rate cuts. Over the same period, central banks have injected over US$12 trillion under QE (Quantitative Easing) programs into money markets. Over US$26 trillion of government bonds are now trading at yields of below 1% with over US$6 trillion currently yielding less than 0%. 

These policies, according to policy makers, have been crucial to the ‘recovery’.

Financial market valuations have increased but remain reliant on low rates and abundant liquidity. The effect on the real economy is less clear. Policy makers argue that without these actions to support growth, employment and investment would have been weaker. It is a proposition that is, of course, impossible to test.  Den Rest des Beitrags lesen »

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China’s Stock Market Crash: Part 1 – Communist Shares

Posted by hkarner - 13. November 2015

By on November 11, 2015  , RGE EconoMonitordas

China’s Stock Market Crash: Part 1 – Communist Shares

Most things in China are unfamiliar to foreigners, even its stock market. This is the first part of a three part series on the Chinese stock market crash.

Between 2013 and mid-2015, the Shanghai Stock Exchange Composite Index rose by around 250% from around 2,000 to over 5,000. Other Chinese indices, especially the Shenzhen Stock Exchange and the ChiNext index, dominated by smaller and technology shares, also rose sharply. Since reaching its peak in June 2015, the indexes have fallen sharply, by around 30%. The loss equates to around US$3-4 trillion dollars.

The phenomenon is hardly new, with similar episodes in 2001 and 2007/ 2008. In the later, the benchmark Shanghai Composite index also topped 5,000, a rise of 90% followed by a fall of 70%. 

Socialist Stocks

There is an obvious contradiction between private property, stock markets and socialism. Mao Zedong famously used the term “capitalist roaders” to castigate Communist Party members who favoured market driven economics.

Chinese stock markets are complex, involving multiple types of shares and convoluted ownership arrangements. There are A-shares: Renminbi denominated shares in mainland China-based companies whose ownership is restricted to mainland citizens and foreigners under the regulated Qualified Foreign Institutional Investor (QFII) system. There are B-shares which are quoted in foreign currencies (such as the US dollar) and can be purchased by domestic and foreign investors (with a foreign currency account). There are H-shares: Hong Kong dollars denominated shares in Chinese companies which are listed in and trade on the Hong Kong Stock Exchange.  Den Rest des Beitrags lesen »

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Central Banks Policy Asynchronous-ity – A Source of New Risk

Posted by hkarner - 23. September 2015

Author: Satyajit Das  ·  September 21st, 2015  ·  RGE EconoMonitordas

Since 2009, the key driver of financial markets has been low rates and abundant liquidity which has boosted all asset prices. The total amount of money pumped into global money markets is around US$10-12 trillion, enough to buy each person on earth a widescreen flat TV.

In the great reflation, according to one estimate, over 80 percent of equity prices are supported in some way by quantitative easing (“QE”). In Australian both real estate prices and share markets have been underpinned by the global flow of money. Today, as much as US$200-250 billion in new liquidity each quarter may be needed globally to simply maintain asset prices. However, the world is entering a period of asynchronous monetary policy, with divergences between individual central banks which has the potential to destabilise asset markets

The discussion around the possible first increase in US interest rates, beginning the process of reversing the emergency zero interest rate policies implemented to combat the 2008 crisis kisses an essential point. The US Federal Reserve is scaling back, terminating purchases of government bonds and mortgage backed securities (“MBS”), which at their peak provided over US$1 trillion a year in new funds to markets. While new purchases have ceased, the Fed does not plan to sell its portfolio of around US$4 trillion of securities. It will continue to reinvest principal payments from its holdings of MBS and roll over maturing Treasury bonds.  Den Rest des Beitrags lesen »

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