WSJ: Bank of Japan has issued a booklet that tires to explain negative interest rates in five minutes or less. Good luck!
More like “One Flew Over the Cuckoo’s Nest”
Maybe Doug Flutie should be head of the Federal Reserve. Flutie’s infamous hail May pass ended up with a touch down. Janet Yellen’s Hail Mary is more likely to end up with a safety rather than creating safety.
-Currently, economic growth in most of the largest nations is deteriorating, and once again the central bankers are grasping for remedies.
Rising sales of safes show how consumer trust can be jeopardised, writes Huw van Steenis…
Conventional thinking is that negative rates are just a natural continuation of quantitative easing, like dialling down the air conditioning. This, though, underestimates how financial intermediaries may actually respond. They erode banks’ margins. They give lenders an incentive to shrink, not grow. They encourage banks to seek out opportunities overseas rather than in their home markets. They also risk disruptions to bank funding. All go against the grain of the central banks’ desire to ease credit conditions and support financial stability.
By Ben Bernanke
The U.S. economy is currently growing and creating jobs, a situation I hope and expect will continue. We can’t rule out the possibility, though, that at some point in the next few years our economy will slow, perhaps significantly. How would the Federal Reserve respond? What tools remain in the monetary toolbox?
FORGIVE THEM FATHER FOR THEY KNOW WHAT THEY DO…
The world economy would be worse off without negative interest rates, according to International Monetary Fund Managing Director Christine Lagarde.
Negative rates in Europe and Japan have helped support global growth and price gains, she said in an interview during a visit to Vietnam on Friday. The finance sector may need to implement new business models as a result, she said.
…Central bankers are at it again. After having taken policy rates precipitously to zero following the global financial crisis of 2008 and experimented with the new instruments of quantitative easing and forward guidance, they are back in the lab. The new gadget is called negative interest rate policy, and it is emitting a distressing tick…
..So any time you’re gettin’ low
‘Stead of lettin’ go, just remember that ant
Oops, there goes another rubber tree plant
(Oops, there goes another rubber tree plant)
Oops, there goes another rubber tree plant(When troubles call
And your back’s to the wall
There a lot to be learned
That wall could fall)…,
-Frank Sinatra from High Hopes
Unintended Consequences of NIRP in Scandinavia risks housing and mortgage bubbles.
Europe and other parts of the world are in for big risks.
Desperate times call for desperate and somewhat speculative measures. The European Central Bank (ECB) cut its deposit rate last Thursday, pushing it deeper into negative territory.
In 1987, the former-Chemical Bank had $61 billion in assets. In a series of mega-mergers orchestrated by Chemical Chairman and CEO Walter Shipley, four of the largest domestic banks were with J.P. Morgan. Chemical’s $61 billion balance sheet in 1987 eventually became part of the $2.5 trillion J.P. Morgan Chase balance sheet in 2015.
Former Chemical Vice Chair Richard S. Simmons’ quote in a June 1987 New York Times article was prophetic yet a touch understated. The impact of ending Glass Steagall and the inevitable mergers would result in five big domestic banks each with $500 billion in assets which Simmons believe would be hard to wrap your brain around.
The Chemical executive (Richard Simmons) predicts that by the mid-1990’s there will be five major United States banks with assets of about $500 billion each. Assets of Citicorp, the nation’s largest bank, now total $193 billion.
According to Simmons, ”It’s hard to grapple with the concept of a very big bank,” he said. ”But when we wake up and realize that financing is being controlled by a cartel of foreign banks, the American people are going to be very unhappy.”
So what does that make banks with $2.5 trillion sheets. Hmmm…