Is Ben Bernanke wrong, or is QE impotent? 25 Jun 2013 Investors are upset, but why? They might just be “feral hogs”, trying to scare the Fed into abandoning plans to tighten money. They might fear tightening now will stop a weak recovery. Or maybe they think central banks don’t have “whatever it takes” to help the economy.
China’s bonfire of liquidities claims first victim 24 Jun 2013 Stocks tumbled after the central bank hinted it won’t help overstretched banks, and that they should make better use of what they’ve got. Lenders and speculators won’t like it, but for the economy it’s helpful. A bit more financial chaos is a fair price for better quality growth.
Central banks are long way from becoming ordinary 24 Jun 2013 The Bank for International Settlements says it’s time for unconventional central bank policies to give way to supply-side reforms. That’s sensible in principle, but conventional tools don’t work in extraordinary times. Normalcy will remain an aspiration for several years yet.
China credit squeeze challenges “age of ambiguity” 21 Jun 2013 Imprecision has been good policy for China. The belief that deposits are guaranteed, and that banks can’t fail, has underpinned the last decade of rapid growth. A financial crisis, though, calls for facts and plans - otherwise rumours and half-truths can wreak havoc.
Bernanke should be international man of mystery 20 Jun 2013 The Fed chairman has embraced a far more communicative approach than his predecessors. The benefits, however, aren’t obvious. Based on the latest reaction in the markets, investors are parsing his comments as much as they did Alan Greenspan’s. Maybe fewer words would say more.
G8 is forum for hard questions about central banks 17 Jun 2013 When world leaders talk about monetary policy this week, they should discuss how to replace the discredited shibboleths of central banking, namely narrow inflation targeting and political independence. It’s time for more nuanced - and controversial - goals and tools.
Book review: Nazis, secrecy and central banking 14 Jun 2013 The Bank for International Settlements is a taxpayer-funded institution that controls global finance. Yet its history, including its links to the Nazis, is less than encouraging, says Adam LeBor in Tower of Basel. His thrilling exposé reveals another of finance’s blind spots.
Europe tries to skirt both chaos and complacency 13 Jun 2013 Governments struggle to make tough choices when markets are forgiving. Rising yields on risk-free debt, and the German constitutional court’s unpicking of the ECB’s bond buying, herald a tougher ride for peripheral bond markets, and less chance for governments to rest easy.
UK avoids statistical brink on money printing 13 Jun 2013 It’s not just for geeks. A narrow technical ruling - the government can’t tweak the accounting of QE transactions to cut the deficit - is a political slap. But statisticians have dodged the fundamental question: who really pays when governments print money?
Markets suffer too much central bank attention 12 Jun 2013 It’s Goodhart’s law: indicators start misbehaving as soon as they are seen to be telling gospel truths. The monetary authorities think strong asset markets and weak currencies will help growth, but their financially orientated policies are now more confusing than helpful.
Deflation flu could leave Asia feeling very sick 12 Jun 2013 Producer prices in the region are sliding, and not just because commodities are getting cheaper. The main culprit is flagging consumption in the United States. If companies can’t compensate for lower prices by selling more, they may struggle to repay growing debt.
German court pragmatism tested by ECB bond buying 11 Jun 2013 The constitutional court in Karlsruhe has started hearing arguments about the ECB’s planned bond-buying programme. There is a non-negligible risk that it may conclude that the central bank’s plans are outside its remit. Such a verdict would be toxic in all aspects. But judges also have legal ways to show pragmatism.
Carney in doesn’t mean pound down as QE heads out 10 Jun 2013 The Bank of England’s new governor probably won’t be Mr. Easy Money. Even if he wants more quantitative easing and a cheaper currency, he’ll need to persuade a recalcitrant Monetary Policy Committee. And QE is going out of fashion. The pound looks a good bet as the UK picks up.
Hugo Dixon: Euro zone mustn’t flunk bank cleanup 10 Jun 2013 The zone is haunted by zombie banks - the result of sweeping bad loans under the carpet. The ECB has a golden opportunity to press the reset button in its new role as supervisor. But if the exercise is handled badly, the economy and its own reputation will suffer.
Japan index: Reluctant spenders ignore BOJ bazooka 10 Jun 2013 The central bank’s aggressive money-printing pledge has yet to impress consumers. Though the Breakingviews Abenomics Index rose for a fifth month in April, spending declined. Unless households open their wallets, Prime Minister Abe’s anti-deflation drive could hit a speed bump.
Draghi could use euro calm for IMF-style mea culpa 6 Jun 2013 The central bank chief wisely avoided rate cuts or extraordinary measures. But he dodged the biggest storm in Europe right now, the IMF’s criticism of the Greek bailout. The ECB has a lot to be proud of, but reflection could teach useful lessons. It’s a good time to take stock.
Making sense of the ECB’s negative rates dilemma 3 Jun 2013 European Central Bank officials talk the idea of negative rates up and down. This radical monetary policy might pull the fragmented euro zone back together. It could also backfire. The Breakingviews guide to negative rates explains why policymakers are being coy.
Fed generates the wealth, but where’s the effect? 31 May 2013 Americans’ private worth grew twice as fast as the U.S. economy last year, due largely to the rise in stocks and other financial assets. They can thank Ben Bernanke for that. Consumers aren’t, however, rushing to spend their gains. It’s another reason to question Fed policy.
Bubble in bubbles has further to inflate 31 May 2013 Are central banks inflating another financial bubble? Investors and pundits are obsessed with the question. But while it feels like there’s a bubble in bubble talk, usage of the word is below its last peak. Like the real thing, a bubble bubble is hard to spot before it bursts.
Memo to central banks: you can’t control markets 30 May 2013 The Fed, Bank of Japan and their peers are certainly influential. But the recent rapid rise of global bond yields is a healthy reminder of the limits to their power. Monetary policymakers don’t want a bond rout, but they will struggle to prevent one if investors lose confidence.