Home » Posts tagged 'RBS'
Tag Archives: RBS
Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?
Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?
“Overall, we believe the latest package is far from a game changer,” Matejka opined.
What was especially interesting about that particular note was the following graph and set of tables which show just how “effective” NIRP has been for the five central banks that have tried it so far.
As you can see, once you go NIRP, it’s pretty much all downhill from there whether you’re talking inflation, the economy, or even equities.
Given that, and given that the entire idea is absurd on its face for a whole laundry list of reasons, one wonders why any central banker would chase down this rabbit hole only to find themselves the protagonist in the latest retelling of “Krugman in Wonderland”.
In any event, for those wondering whether the Fed will join the ECB, the BoJ, the Riksbank, the SNB, and the NationalBank in this increasingly insane monetary experiment, below, courtesy of Bloomberg, find a chronological history of Fed and analyst commentary on NIRP in America.
FED COMMENTARY
- March 16: Yellen said during post-FOMC press conference Fed isn’t actively considering negative rates, studying effects in other nations
- March 2: San Francisco President Williams said “we’re not doing negative interest rates”; Williams Feb. 25 said negative rates are “potentially in the toolbox” but may have “unintended consequences”
- March 1: Former Fed Chairman Alan Greenspan said on Bloomberg Radio and TV negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment…click on the above link to read the rest of the article…
Why the Black Hole of Deflation Is Swallowing the Entire World … Even After Central Banks Have Pumped Trillions Into the Economy
Why the Black Hole of Deflation Is Swallowing the Entire World … Even After Central Banks Have Pumped Trillions Into the Economy
Many high-powered people and institutions say that deflation is threatening much of the world’s economy …
China may export deflation to the rest of the world.
Japan is mired in deflation.
Economists are afraid that deflation will hit Hong Kong.
The Telegraph reported last week:
RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.***
Andrew Roberts, the bank’s research chief for European economics and rates, said that global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings.
The Independent notes:
Lower oil prices could push leading economies into deflation. Just look at the latest inflation rates – calculated before oil fell below $30 a barrel. In the UK and France, inflation is running at an almost invisible 0.2 per cent per annum; Germany is at 0.3 per cent and the US at 0.5 per cent.Almost certainly these annual rates will soon fall below zero and so, at the very least, we shall be experiencing ‘technical’ deflation. Technical deflation is a short period of gently falling prices that does no harm. The real thing works like a doomsday machine and engenders a downward spiral that is difficult to stop and brings about a 1930s style slump.
Referring to the risk of deflation, two American central bankers indicated their worries last week. James Bullard, the head of the St Louis Federal Reserve, said falling inflation expectations were “worrisome”, while Charles Evans of the Chicago Fed, said the situation was “troubling”.
Deflation will likely nail Europe:
…click on the above link to read the rest of the article…
Australia Is “Going Down Under”: “The Bubble Is About To Burst”, RBS Warns
Australia Is “Going Down Under”: “The Bubble Is About To Burst”, RBS Warns
Thanks to a variety of idiosyncratic political crises and country-specific stumbling blocks, Brazil, Turkey, Malaysia, and to a lesser extent Russia, have received the lion’s share of coverage when it comes to assessing the EM damage wrought by the comically bad combination of slumping commodities prices, depressed Chinese demand, slowing global trade, and a “surprise” yuan devaluation.
Put simply, the intractable political stalemate in Brazil, the civil war in Turkey, the 1MDB scandal in Malaysia (and the fact that the country was at the center of the 1998 meltdown), and the hit Russia has taken from depressed crude prices mean that if you want to pen a story about emerging market chaos, those four countries have plenty to offer in terms of going beyond the generic “falling commodities + a decelerating China = bad news for EM” narrative.
But just because other vulnerable countries aren’t beset with ethnic violence and/or street protests doesn’t mean they too aren’t facing crises due to falling commodity prices and the slowdown of the Chinese growth machine.
One such country is Australia, which in some respects is an emerging market dressed up like a developed economy, and which of course has suffered mightily from the commodities carnage and China’s transition away from an investment-led growth model.
Out with a fresh look at the risks facing Australia is RBS’ Alberto Gallo. Notable excerpts are presented below.
* * *
From RBS
Australia has become a commodity focused economy, with an increasing exposure to China. For the past decades, Australia has been buoyed by the rapid Chinese expansion, which outpaced the rest of the world. Australia benefited from China’s strong demand for commodities given its investment-led growth model. China is Australia’s top export destination and 59% of those exports are in iron-ore. But as China struggles to manage its ongoing credit crunch and continues its shift to consumption-led growth Australia’s economy is likely to be hurt by lower demand for commodities.
…click on the above link to read the rest of the article…
Don’t Forget China’s “Other” Spinning Plate: Trillions In Hidden Bad Debt
Don’t Forget China’s “Other” Spinning Plate: Trillions In Hidden Bad Debt
To be sure, there’s every reason to devote nearly incessant media coverage to China’s bursting stock market bubble and currency devaluation.
The collapse of the margin fueled equity mania is truly a sight to behold and it’s made all the more entertaining (and tragic) by the fact that it represents the inevitable consequence of allowing millions of poorly educated Chinese to deploy massive amounts of leverage on the way to driving a world-beating rally that, at its height, saw day traders doing things like bidding a recently-public umbrella manufacturer up 2,700%.
The entertainment value has been heightened by what at this point has to be some kind of inside baseball competition among media outlets to capture the most hilarious picture of befuddled Chinese traders with their hands on their faces and/or heads with a board full of crashing stock prices visible in the background. Meanwhile, the world has recoiled in horror at China’s crackdown on the media and anyone accused of “maliciously” attempting to exacerbate the sell-off by engaging in what Beijing claims are all manner of “subversive” activities such as using the “wrong” words to describe the debacle and, well, selling stocks. Finally, China’s plunge protection has been widely criticized for, as we put it, “straying outside the bounds of manipulated market decorum.”
And then there’s the yuan devaluation that, as recent commentary out of the G20 makes abundantly clear, is another example of a situation where China will inexplicably be held to a higher standard than everyone else.That is, when China moves to support its export-driven economy it’s “competitive devaluation”, but when the ECB prints €1.1 trillion, it’s “stimulus.”
…click on the above link to read the rest of the article…
Germany Crushes All Hope Of Greece Getting Debt Relief
Germany Crushes All Hope Of Greece Getting Debt Relief
As the Grexit debate is falling into the background a new, far more powerful conflict emerges: one between Germany on one side, and the IMF, France, Italy, and perhaps even the US, when it comes to the all important issue of debt relief.
As a reminder, it was the unexpected release of the IMF’s debt (un)sustainability draft late last week (with US support over the vocal objections of Europe) that not only gave Tsipras a Greferendum win (he did not desire), but showed clearly that without a debt haircut of at least 30%, any Greek deal will merely lead to another, even more violent Greek default down the line.
Then, overnight, the Telegraph showed that the “debt-haircut” axis has even more supporters in Europe:
French leaders are working in concert with the White House. Washington is bringing its immense diplomatic power to bear, calling openly on the EU to put “Greece on a path toward debt sustainability” and sort out the festering problem once and for all.The Franco-American push is backed by Italy’s Matteo Renzi, who said the eurozone has to go back to the drawing board and rethink its whole austerity doctrine after the democratic revolt in Greece. He too now backs debt relief for Greece.
Finally, it was none other than Tsipras who piggybacked on the IMF’s imlicit recommendation who following the “victorious” referendum made a clear demand of Europe:
- TSIPRAS ASKS FOR 30 PERCENT DEBT HAIRCUT
Fast forward to this morning when shortly after the latest Greek capitulation, when in Tsipras’ official request for ESM bailout he said timidly that “as part of a broader discussion to be held, Greece welcomes the opportunity to explore potential measures to be taken so that its official sector related debt becomes both sustainable and viable over the long term” Germany made it very clear whether there will be any debt haircuts, or reprofiling in the coming years.
Nein.
…click on the above link to read the rest of the article…
Goldman “Conspiracy Theory” Validated As ECB Expands QE Program
Goldman “Conspiracy Theory” Validated As ECB Expands QE Program
The ECB has expanded the list of SSA securities eligible for purchase under PSPP. The updated list includes:
- Tyoettoemyysvakuutusrahasto
- OeBB-Infrastruktur
- Asfinag
- Infraestruturas de Portugal
- Entidade Nacional para o Mercado de Combustiveis
- Ferrovie dello Stato Italiane
- Terna Spa – Rete Elettrica Nazionale
- ENEL
- SNAM
- Administrador de Infraestructuras Ferroviarias – Alta
- Velocidad
- SNCF Reseau
- Caisse Nationale des Autoroutes
- DARS
Since the program’s inception, we and others have said the central bank will likely need to add more names to the list of QE-eligible SSA bonds or move into corporate credit in order to ensure that NCBs can meet their purchase targets under the capital key (especially in core markets where scarcity is a problem) and in order to allay concerns about liquidity in the secondary market for some core EGBs.
That said, the decision to expand the list this week is obviously no coincidence and reflects the fact that the ECB is keen to ensure there are no lasting “spillover” effects from the meltdown in Greece on periphery yields which the central bank has worked so hard to keep unrealistically low.
The move also, as RBS noted this morning, shows the ECB is “ready to intervene closer to the real economy.” RBS also says the bank could move into IG corporate credit next, something we predicted months ago when we discussed the lower limit problem.
So that’s the surface-level analysis.
Beyond that, today’s announcement by the ECB seems to prove what we said in “Goldman’s Conspiracy Theory Stunner“; namely that Mario Draghi wants to push Greece over the edge in order to give himself an excuse to expand QE. Here’s how we explained the situation earlier this week:
…click on the above link to read the rest of the article…
