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The Federal Reserve – Which CREATED Quantitative Easing – Admits QE Doesn’t Work
The Federal Reserve – Which CREATED Quantitative Easing – Admits QE Doesn’t Work
Even the Fed Admits QE Doesn’t Work
The Vice President of the Federal Reserve Bank of St Louis (Stephen Williamson) writes in a new Fed white paper (as explained by Zero Hedge):
- The theory behind Quantitative Easing (QE) is “not well-developed”
- The evidence in support of Ben Bernanke’s views on the transmission mechanisms whereby asset purchases affect outcomes are “mixed at best”
- “All of [the] research is problematic,” Williamson continues, as “there is no way to determine whether asset prices move in response to a QE announcement simply because of a signalling effect, whereby QE matters not because of the direct effects of the asset swaps, but because it provides information about future central bank actions with respect to the policy interest rate.” In other words, it could be that the market is just reading QE as a signal that rates will stay lower for longer and that read is what drives market behavior, not the actual bond purchases.
- “There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation. [Background.] For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target. Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation or deflation.”
…click on the above link to read the rest of the article…
There’s Something Wrong With The World Today and It’s 1995
There’s Something Wrong With The World Today and It’s 1995
There weren’t any surprises in the “final” GDP update for Q1. Going back to -0.2%, the same interpretations still apply, especially and including the inventory contribution. Economists and policymakers want to talk particularly about how Q1 is prone to “residual seasonality” but that is missing the bigger part of the problem. Whether Q1 was -0.2% or +2% doesn’t really matter, as what truly makes this a dangerous economic situation is that Q1 and all the prior quarters were not a steady +4%.
To listen to economists today is to suggest that such an expectation amounts to wishful thinking, and that such “normal” growth is no longer. That sentiment may apply, but only to the narrow manner in which orthodox economics can integrate real world factors. In other words, “they” accept that there is something wrong but cannot answer the relevant and primary question as to what that might be.
This problem is obvious in every economic account, including GDP. Using year-over-year figures to harmonize among other economic systems, the lack of growth is striking post-crisis – made all the more so by the size of the huge hole left in the wake of the Great Recession itself. That means, even by this count, the opportunity cost of this non-recovery is severely understated.
I picked 1995 as a starting point for a reason, which I’ll get back to below. Suffice to say, in isolating only the growth periods of each economic cycle the current version is by comparison about half that of the late 1990’s. The middle cycle, the housing bubble age, shows what is plainly a transition from the first to the third. The primary opportunity cost is not simply the difference between them, but rather far more importantly the compounding nature of time. In other words, the longer these deficiencies drag the more costly in very real economic distortions that cannot be measured.
…click on the above link to read the rest of the article…
The “War on Cash” Migrates to Switzerland
The “War on Cash” Migrates to Switzerland
Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun
The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.
Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.
This reminded us immediately that we have just come across another small article in the local European press(courtesy of Dan Popescu), in which a Swiss pension fund manager discusses his plight with the SNB’s bizarre negative interest rate policy. In Switzerland this policy has long ago led to negative deposit rates at the commercial banks as well. The difference to other jurisdictions is however that negative interest rates have become so pronounced, that it is by now worth it to simply withdraw one’s cash and put it into an insured vault.
Having realized this, said pension fund manager, after calculating that he would save at least 25,000 CHF per year on ever CHF 10 m. deposit by putting the cash into a vault, told his bank that he was about to make a rather big withdrawal very soon. After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it.
…click on the above link to read the rest of the article…
Taxes and corruption
Taxes and corruption
It seems that the rumbling story about HSBC’s Swiss branch has achieved what political pollsters know as “cut through” – meaning that it’s of interest to voters as well as to those reporters who are sentenced to watch Prime Minister’s Questions each week.
The story reminded me of a passage in Wolfgang Streeck’s 2014 article ‘How Will Capitalism End?’ in which he explores the drivers of change that could bring about, well, the end of capitalism. The article deserves more space here on another occasion, but for the moment I just wanted to quote what he writes about his fifth driver, corruption:
Finance is an ‘industry’ where innovation is hard to distinguish from rule-bending or rule-breaking; where the payoffs from semi-legal and illegal activities are particularly high; where the gradient in expertise and pay between firms and regulatory authorities is extreme; where revolving doors between the two offer unending possibilities for subtle and not-so-subtle corruption; where the largest firms are not just too big to fail, but also too big to jail, given their importance for national economic policy and tax revenue; and where the borderline between private companies and the state is more blurred than anywhere else, as indicated by the 2008 bailout or by the huge number of former and future employees of financial firms in the American government.
So far, fairly familiar, if admirably concise. The more important element here is that what this has done is broken the moral story about capitalism – work and the Protestant ethic and all that – that writers such as Max Weber spent so long trying to assemble at the end of the 19th century and the beginning of the 20th.
…click on the above link to read the rest of the article…
Head Of Largest Swiss Cantonal Bank Says Swiss Capital Controls Are “Certainly Possible”
Head Of Largest Swiss Cantonal Bank Says Swiss Capital Controls Are “Certainly Possible”
Yesterday, when we reported that the SNB had hinted at that most dreaded of possibilities for central planners, one which always implies full loss of central bank credibility, namely capital control, for some inexplicable reason various readers and even contributors (“Another misleading headline by the Tylers. What yellow journalism“) got offended that we dared to point out that the central bank which two days before it crushed FX traders by ending its CHF cap had sworn that “we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy.”
Turns out “yellow journalism” as some call it – usually those who have conflicts of interest and/or put trades in the opposite direction – was spot on once again. Because if yesterday, the SNB’s Jordan merely hinted at capital controls when as he was quoted by Bloomberg (not Reuters), as saying that capital controls “was not a measure that is at the forefront at the moment“,which as we explained “the best way to admit the possibility of capital controls is to not explicitly, and unequivocally reject them. That there is even a possibility of capital controls in a central bank’s arsenal, and everyone suddenly begins to pay attention” then today the head of the largest Swiss cantonal bank, and the fourth largest Swiss Bank, the Zurich Cantonal Bank or ZCB, came out and explicitly said what so many fear (and which warning they would ascribe to as the case may be “yellow journalism”), namely that “lowering Swiss National Bank’s already negative interest rate further or implementing capital controls would be “dramatic” but “certainly possible.”
This is what Zuercher Kantonalbank CEO Martin Scholl said in interview with newspaper Neue Zuercher Zeitung am Sonntag.
And just so readers (and so-called contributors) can blame the NZZ of fanning “yellow journalism” here is the explit quote from the interview:
…click on the above link to read the rest of the article…
The Swiss Franc Will Collapse
The Swiss Franc Will Collapse
I have worked to keep this piece readable, and as brief as possible. My grave diagnosis demands the evidence and reasoning to support it. One cannot explain the collapse of this currency with the conventional view. “They will print money to infinity,” may be popular but it’s not accurate. The coming destruction has nothing to do with the quantity of money. It is a story of what happens when interest rates fall into a black hole.
Yields Have Fallen Beyond Zero
The Swiss yield curve looks like nothing so much as a sinking ship. All but the 20- and 30-year bonds are now below the water line.
Look at how much it’s submerged in just one week. The top line (yellow) is January 16, and the one below it was taken just a week later on January 23. It’s terrifying how fast the whole interest rate structure sank. Here is a graph of the 10-year bond since September. For comparison, the 10-year Treasury bond would not fit on this chart. The US bond currently pays 1.8%.
Swiss Gold Referendum: What It Really Means — Paul Craig Roberts – PaulCraigRoberts.org
Swiss Gold Referendum: What It Really Means — Paul Craig Roberts – PaulCraigRoberts.org.
In a few days the Swiss people will go to the polls to decide whether the Swiss central bank is to be required to hold 20% of its reserves in the form of gold. Polls show that the gold requirement is favored by the less well off and opposed by wealthy Swiss invested in stocks.http://snbchf.com/gold/swiss-gold-referendum-latest-news/ These poll results provide new insight into the real reason for Quantitative Easing by the Federal Reserve and European Central Bank.
First, let’s examine the reasons for these class-based poll results. The view in Switzerland is that a gold backed Swiss franc would be more valuable, and a more valuable franc would increase the purchasing power of wage earners, thus reducing their living costs. For the wealthy stock owners, a stronger franc would reduce Swiss exports, and less exports would reduce stock prices and the wealth of the wealthy.
The vote is clearly a vote about income shares between the rich and the poor. The Swiss establishment opposes the gold-backed franc, as does Washington.
…click on the above link to read the rest of the article…
Governments All Know What is Coming – They Want to Disarm the People | Armstrong Economics
Governments All Know What is Coming – They Want to Disarm the People | Armstrong Economics.
Now the security commission of the Swiss parliament decided (ok, just by 13:12 but they did) to go after all private arms owners to force them to register every weapon. Even the ones which had been bought long ago meaning just before the banking crisis outbreak 2008 
– when there was no registration before.
It’s everywhere the same. Governments know what is coming towards them. Rather than reform – they are digging in their heels.
How Central Banks Use Gold Swaps To “Boost” Their Gold Holdings | Zero Hedge
How Central Banks Use Gold Swaps To “Boost” Their Gold Holdings | Zero Hedge.
With the specter of a “yes” outcome to the Swiss gold referendum finally being priced in by the market, and the frontrunning of the SNB’s potential 1,500 tons of gold purchases starting to move the price of gold higher, a question has emerged: is there enough physical gold to satisfy Swiss gold demand in case of a favorable outcome to the referendum. Well, as Deutsche Bank reports, that may not even be an issue. Because as the following step by step explanation demonstrates, the SNB may simply “window dress” its balance sheet with gold swaps.
So for anyone curious how banks “represent and warrant” that they have thousands of tons of physical gold when in reality they have far less if not zero physical in storage and all in “synthetic” form, here is the blow by blow.
From Robin Winkler of Deutsche Bank
An early suggestion of the ‘gold initiative’ was to transfer Swiss gold reserves to a sovereign wealth fund to protect them from perceived mismanagement by the SNB. This idea was soon dropped. The concern behind the referendum is not the SNB’s management competence but the perceived shortage of gold reserves. Transferring the SNB’s FX reserves to a fund to avoid gold purchases would therefore be a blatant disregard of the political will and probably involve another referendum.
Gold swaps a more realistic option
Another option for the SNB would be using gold swaps to ‘window dress’ its balance sheet rather than holding physical gold or futures contracts. The SNB could borrow gold from counterparties prior to monthly balance sheet reporting dates, re-exchanging it for currency the following day.
…click on the above link to read the rest of the article…
Where Is Swiss Gold? – Location, Location, Location | www.goldcore.com
Where Is Swiss Gold? – Location, Location, Location | www.goldcore.com.
– Introduction
– SNB Continues To Intervene In Politics
– Swiss National Bank initial reaction to gold initiative
– Swiss gold at the US Federal Reserve
– “Stocks that were once at the Federal Reserve have been sold”
– Swiss gold at the Bank of Canada, Ottawa
– 1,300 tonnes of gold sold: SNB’s Michael Paprotta
– SNB’s Paprotta Interview
– SNB’s Paprotta view on Swiss gold held in London
– Conclusion
Introduction
The Swiss referendum on monetary gold approaches on 30 November, less than four weeks, one aspect of the debate continues to focus on the need, or otherwise, for the Swiss National Bank (SNB) to continue to store a percentage of the Swiss gold reserves abroad.
SVP National Councillor, Lukas Reimann (SG) speaking at the launch of the Gold Initiative Committee’s press conference in Bern, 23 October 2014
One of the three objectives of the gold initiative is to have all Swiss gold stored in Switzerland. The Swiss central bankers and the ‘no’ campaign maintains that it’s imperative to maintain foreign gold storage at major gold trading centres that can be quickly traded in the event of a financial crisis. While the ‘yes’ campaign counters that this argument is redundant and that it is far safer to have Switzerland’s gold stored in Switzerland during a financial crisis.
…click on the above link to read the rest of the article…
This Little Piggy Bent The Market | Things That Make You Go Hmmm… Investment Newsletter | Mauldin Economics
About 18 months ago, I had a very pleasant chat with a gentleman by the name of Luzi Stamm.
But Herr Stamm was different.You may detect some measure of surprise in my words, and the reason for that is quite simple: Luzi Stamm is a politician; and, as regular readers will know, I am no fan of that particular class.
An MP representing the Swiss People’s Party, Stamm was spearheading a federal popular initiative which needed 100,000 signatures in order to comply with the Swiss parliamentary system’s rigid framework regarding referendums. (OK all you “referenda” people out there, I know, OK? But I’m going with “referendums,” so pipe down).
That initiative was one of three being pursued: firstly, a motion to limit immigration into Switzerland to 0.2% per year; secondly, a drive to abolish the flat tax system and for resident, nonworking foreigners to be taxed based instead on their income and their assets; and thirdly, Stamm’s initiative… Well, we’ll get to that shortly; but before we do, we need to understand a little about how Swiss democracy works.
…click on the above link to read the rest of the article…
Switzerland’s Referendum on Gold |
Switzerland’s Referendum on Gold |.
The Swiss National Bank (which is run by a bunch of Keynesian dunderheads – not too surprising for a central bank, but somewhat surprising for Switzerland) is trying its best to somehow thwart the upcoming referendum on gold. If the referendum is successful, at least 20% of the SNB’s assets would have to be held in gold – and the gold would have to be kept in Switzerland.
Not surprisingly, the central bankers argue that this would “severely crimp their flexibility”, apparently completely unaware of the irony. Crimping the “flexibility” of central bankers is a good thing after all. They are doing enough damage as it is. We actually are not quite sure what they are complaining about, since they will still be able to create money out of thin air in nigh unlimited quantities.
However, if they once again more than double the money supply as they have done since 2008 – inter alia to buy up foreign exchange in order to manipulate the CHF’s exchange rate – they will be forced to buy gold as well to keep the 20% reserve level intact if the referendum succeeds.
…click on the link above to read the rest of the article…
