Posted by hkarner - 5. Dezember 2014
Source: The Wall Street Journal
Stock Markets Sink on Lack of Urgency Over QE
FRANKFURT—European Central Bank President Mario Draghi Thursday said the governing council will decide early next year whether its current policies are sufficient to raise inflation toward its target, and noted the decline in oil prices may make that objective more difficult to attain.
The euro jumped and European stocks tumbled after Mr. Draghi’s comments.
Outlining new, lower forecasts for economic growth and inflation over the coming two years, Mr. Draghi said that should the council conclude its policies aren’t sufficient to end a period of very low inflation, that would “imply altering the size, pace and composition of our measures.”
His reference to the “composition” of the central bank’s programs suggests policy makers may consider launching a program of sovereign bond purchases. Known as quantitative easing or QE, they have been a key part of responses from the U.S. Federal Reserve, Bank of England and Bank of Japan . But the ECB has largely refrained from going down this route amid worries, especially from Germany, that such a policy would stoke inflation and discourage countries from reforming their labor markets.
Mr. Draghi said the governing council had discussed “various options of QE.”
“Early next year the governing council will reassess the monetary stimulus achieved and the outlook for price developments,” he told reporters in a news conference. “We will also evaluate oil price developments.”
Mr. Draghi said the ECB’s economists have cut their growth and inflation forecasts for next year. They now expect the eurozone economy to grow by just 1.0%, having previously forecast an expansion of 1.6%, while their projection for inflation was lowered to 0.7% from 1.1%.
However, he said those forecasts didn’t fully incorporate the recent fall in oil prices, which could push the inflation rate even lower in coming months. The annual rate of inflation fell to 0.3% in November, far below the ECB’s target of just below 2%.
Posted in Artikel | Getaggt mit: ECB, Euro, Inflation, QE, WSJ | Leave a Comment »
Posted by hkarner - 4. Dezember 2014
Jean-Pierre Landau 02 December 2014, voxeu
Eurozone inflation has been persistently declining for almost a year, and constantly undershooting forecasts. Building on existing research, this column explores the conjecture that low inflation in the Eurozone results from an excess demand for safe assets. If true, this conjecture would have definite policy implications. Getting out of such a ‘safety trap’ would necessitate fiscal or non-conventional monetary policies tailored to temporarily take risk away from private balance sheets.
Inflation in the Eurozone stood at 0.4% (year on year) in November. It has been persistently declining for almost a year, and constantly undershooting forecasts. The Eurozone is now clearly diverging from many advanced economies, where inflation is either on the rise – albeit at moderate levels – as in the US, or, when falling, still remaining close to target, as the UK.
Inflation has kept falling even in ‘core’ economies, where employment remains strong and the output gap has been reduced, such as Germany. Recent data show little prospect for improvement. According to the October World Economic Outlook (IMF 2014b), under current policies, the Eurozone inflation rate “is expected to remain substantially below the ECB’s price stability objective through at least 2019”. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: ECB, Euro, Inflation, Landau, LTRO, QE, voxeu | Leave a Comment »
Posted by hkarner - 3. Dezember 2014
Source: The Wall Street Journal
Expectations of Further Easing Run High as ECB Meets Thursday
The euro slipped to a two-year low Wednesday, with the latest dose of drab economic data bolstering expectations of further easing ahead of the European Central Bank’s monthly meeting.
The common currency was 0.5% lower against the dollar at $1.2321, the lowest since August 2012.
The ECB makes its policy announcement Thursday, and persistently low inflation and a flagging economic recovery have ramped up the pressure on the central bank to expand its program of asset purchases. Such a move would likely dent the euro, which has steadied since hitting its previous low for the year in November.
Data on Wednesday showed a sharper slowdown in eurozone private sector activity than first estimated. Composite PMI in the currency bloc was revised to 51.1 from 51.4 in November. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Euro, Inflation, WSJ | Leave a Comment »
Posted by hkarner - 29. November 2014
Source: The Wall Street Journal
More Aggressive Stimulus Measures Likely Soon
French consumer spending dropped 0.9% in October from September, the sharpest month-on-month decline since June 2013,
The number of people without jobs in the eurozone rose for the second straight month in October, while the annual rate of inflation fell further below the European Central Bank’s target in November as energy prices tumbled.
This represents a combination of worrying economic developments that increases the likelihood policy makers will soon take more aggressive stimulus measures.
The European Union’s statistics agency Friday said the number of people without work increased by 60,000 in October, the biggest monthly rise since January 2013. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Euro, Inflation, Unemployment, WSJ | Leave a Comment »
Posted by hkarner - 5. November 2014
Author: Ed Dolan · November 4th, 2014 · RGE EconoMonitor
The Fed has declared an official end to quantitative easing. It is a logical time to ask, did QE work? Danielle Kurtzleben gives the honest answer in a recent post on Vox: “It’s very, very hard to know.”
Still, we do know three things that QE did not do. These are worth pointing out, especially since back when QE was just getting under way, there were people who expected that QE 2 would do all of them.
1. QE did not work according to the textbook model
One thing was never in doubt. As the Fed added massively to its assets, QE would cause an equally massive increase in the monetary base—the sum of bank reserves and currency that accounts for the bulk of its liabilities.
Some economists used to refer to the base as high powered money. It got that name from a familiar textbook model, according to which two simple ratios link the monetary base to the rest of the economy. One is the money multiplier, which is the ratio of ordinary money (M2) to the monetary base. The other is the ratio of nominal GDP to the M2 money stock, known as the velocity of circulation of money, or just velocity, for short.
If the money multiplier and velocity were constants, then the monetary base would be high-powered indeed. Any increase in the base (which the Fed can manipulate at will) would cause a proportional increase in nominal GDP. The only thing left to determine would be how much of the change in nominal GDP would express itself as an increase in real output and how much as inflation. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Dolan, Inflation, Money Supply, QE, RGE Monitor | Leave a Comment »
Posted by hkarner - 5. November 2014
To prevent dangerous deflation, the ECB is discussing a massive program to purchase government bonds. Monetary watchdogs are divided over the measure, with some alleging that central bankers are being held hostage by politicians.
At first glance, there’s little evidence of the sensitive deals being hammered out in the Market Operations department of Germany’s central bank, the Bundesbank. The open-plan office on the fifth floor of its headquarters building, where about a dozen employees are staring at their computer screens, is reminiscent of the simple set for the TV series “The Office”. There are white file cabinets and desks with wooden edges, there is a poster on the wall of football team Bayern Munich, and some prankster has attached a pink rubber pig to the ceiling by its feet.
The only hint that these employees are sometimes moving billions of euros with the click of a mouse is the security door that restricts access to the room. They trade in foreign currencies and bonds, an activity they used to perform primarily for the German government or public pension funds. Now they also often do it for the European Central Bank (ECB) and its so-called “unconventional measures.”
Those measures seem to be coming on an almost monthly basis these days. First, there were the ultra low-interest rates, followed by new four-year loans for banks and the ECB’s buying program for bonds and asset backed securities — measures that are intended to make it easier for banks to lend money. As one Bundesbank trader puts it, they now have “a lot more to do.”
A Heated Dispute Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Abenomics, Banken, Draghi, ECB, Fed, Inflation, Japan, Junk Bonds, Nowotny, QE, Spiegel, Weidmann | Leave a Comment »
Posted by hkarner - 4. November 2014
Source: Die Zeit
Der russischen Wirtschaft geht es zunehmend schlechter. Doch Wladimir Putin hat jeden Reformwillen verloren. Die Folge: Der Kampf unter den Eliten wird härter.
” Wie schwierig die ökonomische Situation Russlands ist, lässt sich an einer Zahl ablesen: dem Wechselkurs des Rubels zum US-Dollar. Zwischenzeitlich kostete ein Dollar mehr als 43 Rubel – anderthalb Jahre zuvor waren es noch 30. Seit Anfang des Jahres verlor die russische Währung mehr als ein Fünftel ihres Wertes. Der Verfall spiegelt die tiefgreifende Krise der russischen Wirtschaft, aber auch die Folgen der Sanktionen wider.
“Bislang wurde die Abwertung vom Kreml toleriert, weil sie für die Regierung einen entscheidenden Vorteil hatte: Sie sorgte für zusätzliche Einnahmen, denn viele russische Zölle werden auf Dollarbasis berechnet. Nach Einschätzung des Finanzministeriums in Moskau bringt jeder Rubel, um den der Wechselkurs zum Dollar fällt, etwa 3,7 Milliarden Euro zusätzlich in die Staatskasse. Diesem Geldstrom hat es Russlands Finanzminister zu verdanken, dass der Haushalt bislang ausgeglichen blieb.
“Außerdem hat Russlands Präsident Wladimir Putin viele neue Schulden den Regionen aufgebürdet. Die meisten der Geldgeschenke wie Lohnerhöhungen für Staatsangestellte, die Putin nach seiner Amtsübernahme anordnete, müssen die regionalen Haushalte tragen. Viele haben sich dafür stark verschuldet.
“Auch im kommenden Jahr könnte Russlands Haushalt noch ohne Ausgabenkürzungen auskommen – zumal knapp zehn Milliarden Euro aus einem Reservefonds zum Stopfen möglicher Löcher bereitstehen. Aber dann wird es düster: Der föderale Dreijahreshaushalt, den das Parlament vor gut einer Woche verabschiedete, ist schon überholt. Er geht noch von einem Ölpreis von 100 Dollar pro Fass, von einer Rücknahme der Sanktionen Anfang 2015 und von einem anspringenden Wirtschaftswachstum aus. Nichts davon erscheint im Moment realistisch. Der Ölpreis liegt knapp über 80 Dollar. Spätestens 2016 müssen die Ausgaben gekürzt werden – nach heutiger Schätzung um zehn Prozent.
“Die Nachteile werden sichtbarer Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Inflation, Putin, Russia, Zeit | Leave a Comment »
Posted by hkarner - 4. November 2014
Source: The Wall Street Journal
Commission Cites Tensions in Ukraine, Middle East
The European Commission on Tuesday cut its growth forecasts for the eurozone and the European Union, citing the tensions in Ukraine and the Middle East along with a lack of investment.
The EU’s executive arm now also expects inflation in the eurozone to remain below the close-to 2% targeted by the European Central Bank until at least 2016. That is likely to boost expectations of stronger measures by the ECB such as large-scale purchases of government bonds and other assets.
The commission said it now expects gross domestic product in the 18-country eurozone to grow 0.8% this year, down from 1.2% growth it forecast this spring. In 2015, the eurozone economy will likely grow 1.1%, also less than the 1.7% growth seen in the spring. In 2016, growth in the currency union will rise to 1.7%, the commission said.
The forecasts for the eurozone were dragged down by lower than-expected growth in big countries, including Germany, France and Italy, the latter of which expected to fall back into recession this year. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: ECB, Euro, Europe, Finanzkrise, Growth, Inflation, WSJ | Leave a Comment »
Posted by hkarner - 25. Oktober 2014
Source: The Economist
Politicians and central bankers are not providing the world with the inflation it needs; some economies face damaging deflation instead
IT IS a pernicious threat, all the more so because, at its onset, it seems almost benign. After two generations of fighting against inflation, why be worried if the victory looks just a bit too complete, if the ancient enemy is so cowed as to no longer strain against the chains in which it is bound? But the stable low inflation fought for in the 1980s and 1990s and inflation hazardously close to zero are not so far apart. And as inflation drops, slipping into deflation becomes ever easier. It is in that dangerous position that the world now stands.
In America, Britain and the euro zone central banks have a 2% target for inflation. In all three, it is below that target. In Italy, Spain and Greece, which have experienced wrenching crises and recessions, it is below zero (as it also is in Sweden and Israel). Japan, which finally escaped from deflation in 2013 after more than a decade of struggle, is battling not to return. Leave out the effects of a consumption-tax increase and inflation there is barely half way to its 2% target. Even in China inflation is below 2%, compared with a 4% central government target (see chart 1).
The lowflation of being consistently below an already low target is bad in itself; the deflation it could easy lead to is even worse. There are several reasons. The belief that money made tomorrow will be worth less than money today stymies investment; the belief that goods bought tomorrow will be cheaper than goods bought today chokes consumption. Central bankers can no longer set real (that is, inflation-adjusted) interest rates low enough to restore demand. Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Deflation, Economist, Euro, Helicopter Money, Inflation | Leave a Comment »
Posted by hkarner - 16. Oktober 2014
John Mauldin’s Outside the Box, 15/10
By Cliff Asness, AQR Capital Management LLC
In 2010, I co-signed an open letter warning that the Fed’s experiment with an unprecedented level of loose monetary policy – in amount, and in unorthodox method – created a risk of serious inflation. Sporadically journalists and others have noted that this risk has not come to pass, particularly in consumer prices. Recently there has been an article surveying each of us as to why; seeming to relish in, when provided, our various rationales, presumably as they sounded like excuses. It seems none of the responses provided what the authors clearly wanted, a blanket admission of error. I did not comment for that article, continuing my life long attempt not to help reporters who’ve already made up their mind to make fun of me – I help them enough through my everyday actions, they don’t need more!
More articles of similar bent keep showing up. The authors seem to find it amusing that four years of CPI data wouldn’t get people to change their economic views, while ignoring that 80 years of overwhelming evidence has not dissuaded Keynesians from the belief that this time, if they could only run everything, not just most things, they’d really get it right.
Focusing my attention, as was predestined, Paul Krugman lived up to his lifelong motto of “stay classy” with a piece on the subject entitled Knaves, Fools, and Quantitative Easing. Some lesser lights of the Keynesian firmament have also jumped in (collectivists, of course, excel at sharing a meme). Responding to Krugman is as productive as smacking a skunk with a tennis racket. But, sometimes, like many unpleasant tasks, it’s necessary. I will, at least partially, make that error here, while mostly trying to deal with the original issue separate from Paul’s screeds (though one wonders if CPI inflation had risen in the last four years if Paul would be admitting his entire economic framework was wrong – ok, one doesn’t really wonder – and those things never happen to Paul anyway, just ask him). Den Rest des Beitrags lesen »
Posted in Artikel | Getaggt mit: Asness, Fed, Inflation, Krugman, Mauldin, QE, USA | Leave a Comment »