Discover and read the best of Twitter Threads about #centralbanks

Most recents (24)

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Read 8 tweets
1/Thanks to @steve_sedgwick and @cnbcKaren for having me on @CNBC #SquawkBox this morning.

We talked about - what else? - #inflation and #centralbanks and whether the #Fed & peers are 'making an historic mistake', in Steve's words.

A few charts & comments for background:-
2/It's trite to say the jump in price indices is *all* attributable to a 'basis effect' when they've accelerated so much THIS year.
3/ #JeromePowell and his merry band may wish to believe that the rise is a mere blip, but all too many businessmen & women (i.e., the people who *really* matter) seem to believe the converse is the case.
Read 10 tweets
Our #inflation forecasts from March on plus the ultimate scare: the possibility of a hyperinflation.

The "shock" was plainly visible in prices of online products and, e.g., shipping 👇. When economies opened, it materialized. 1/4
@GnSEconomics #economy gnseconomics.com/2021/04/01/q-r…
By June, it was clearly visible that the source of #inflation had moved from "want to have products" to, e.g., food, rents and fertilizers, that is, to "need to have products", which would be reflected on wages

Alas, inflation was here to stay. 2/
gnseconomics.com/2021/07/15/inf…
But, what truly worries us, is the possibility of a very rapid #inflation , or hyperinflation. It's pre-requisites are:

1) Vast issuance of central bank credit, like QE, and
2) Diminution of production possibilities. 3/

Both are here now. 🥶
gnseconomics.com/2021/02/24/is-…
Read 4 tweets
We first warned on the possibility of a 'perfect storm' in December 2017.👇

We envisaged that the "storm" would engulf the global #economy in two years, but noted that everything depends on the actions of #Centralbanks and #China .
1/14
@GnSEconomics
gnseconomics.com/2017/12/19/q-r…
As we now know, central banks have been very innovative in postponing the crisis.

The bailout operations effectively started in 2016, when China unleashed a massive 'credit bonanza' to halt the collapse in its housing markets, and a global #recession . 2/
gnseconomics.com/2018/12/06/the…
They continued in December 2018/early January 2019, when the near collapse of the Chinese banking sector and credit markets in the US forced the PBoC to inject hundreds billions worth of liquidity into the banking system and the Fed to 'pivot'. 3/
reuters.com/article/us-usa…
Read 14 tweets
Currently, the most important thing, when one wants to understand the behavior and the future of financial markets, is to understand the programs of quantitative easing, or QE.

A short thread. 1/6
@GnSEconomics #inflation #centralbanks #Fed #StockMarket
mtmalinen.substack.com/p/quantitative…
They are asset purchase programs of the central banks and they have been running since late 2008 (with the Bank of Japan experimenting such programs from March 2001 till March 2006).

In them the central bank buys (mostly) government bonds, but also corporate debt... 2/
...and sometimes even stocks. They have altered the financial system in a profound and a very dangerous way.

This is a pressing issue now when #inflation has risen markedly, as tapering of QE -programs, where central banks end purchases of new assets, is likely... 3/
Read 6 tweets
Thanks to @steve_sedgwick & @cnbcKaren for having me on #CNBC #SquawkBox this AM.

What did we discuss? Well, #inflation of course!

I prepared some slides for the show which I'm happy to present in this thread.
1/n
#macro #Fed #Yellen #JeromePowell #bankofengland #QE
Are people in denial or is the #centralbank money flood just drowning all the signals?
2/n
#inflation
#Commodities, #freight, #carbon - and a whole lot besides - sure do cost a lot more, these days.
3/n
Read 14 tweets
Is there an incoming policy error by the Federal Reserve? $DXY #FederalReserve #Dollar #Policy #Fed

Thread 1/
Over the past several weeks, we have seen significant Central Bank actions globally. This reflects a market flush with cash and a desire by the Federal Reserve to hold short-term rates positive. 2/
Mid-June 2021 FOMC Summary:
1. Unchanged rate and QE policy
2. Reverse Repo rate increase to 5bps
3. IOER increase to 15 bps
4. Dot plot showing rate hikes sooner than expected
3/
Read 17 tweets
A long thread on the dominance of #centralbanks over our economies.

It should be reminded that central banks were never planned to have such a massive role in the #economy .

The idea of the central bank was born in the Middle-Ages, when failures of the... 1/23
@GnSEconomics
...largest merchant banks of that era, founded by the Bardi and Peruzzi families, shocked the Italian City-State of Florence in 1343 and 1346.

These financial crises gave birth to the idea that the commercial banking sector would need a ‘liquidity backstop’, i.e.,... 2/
...an entity that could lend to private financial institutions in trouble. This was the original aim of central banks: to act as ‘piggy banks’ for commercial banks.

The first central bank that resembled the modern ones emerged in 1609, when the Dutch empire... 3/
Read 23 tweets
In preparation for my slot on #SquawkBox yesterday, I sent the guys a few slides as a synopsis of my last, detailed subscriber report for the discussion.

I called it #Pyromania. Feel free to take a look

1/x

#macro #bonds #commodities #dollar #inflation #centralbanks #fiscal
Is it possible to overkill an act of overkill? #JeromePowell & #JanetYellen seem set to let us find out.

2/x
Not that they're alone in their folly, of course. The #ECB is outodoing them handsomely, while the #bankofengland is breaking records stretching back to its founding, 327 years ago.
#centralbanks
3/x
Read 10 tweets
Citibank 1/5: #AUD: Where does #RBA go in 2021 and beyond? - the RBA Governor concedes that it will take years before it achieves its inflation and employment goals. Despite the meaningful upgrade to the activity outlook, underlying inflation—at 1.25% in 2021 and 1.5% in 2022—
Citibank 2/5: is expected to remain below the Bank’s 2%-3% tget through the forecast horizon. Moreover, there’s still excess spare capacity in labor market; the unemployment rate forecast of 5.25% by the end of next year is still above Bank’s NAIRU (natural rate of unemployment)
Citibank 3/5: estimate of 4.5%. RBA’s balance sheet is set to expand further...the total size of the RBA’s balance sheet is set to increase from its current level of $AU330bn to around AU$600bn by November, or close to 30% of nominal GDP
Read 5 tweets
Now, even as the #CoronavirusVaccine dominates the headlines, we should take heed on the three detrimental 'undercurrents' that are converging to a 'Perfect Storm':

1) Financial instability.
2) Economic fragility.
3) Political uncertainty.

Thread. 1/24
@GnSEconomics
In June 2013, we warned on the detrimental effects of the prolonged low int. rate envir.

"The long-term effects of the zero-bound on the financial markets are not known. What is known, is that extended periods of monetary easing may lead to bubbles." 2/
gnseconomics.com/wp-content/upl…
We were not particularly worried about the situation in 2013, but in June 2016 we were:

"...fraudulent behavior, indebtedness, persistent macroeconomic imbalances, and major mispricing of risks are usually present before major financial disruptions." 3/
gnseconomics.com/wp-content/upl…
Read 24 tweets
1/ Let us share some fundamentals on #gold price, given latest price action has been testing nerves of bulls after 50% increase post 2018.

Thread @Mintgecko @TheLastDegree @GMoneyResearch @AdamMancini4 Image
2/ View gold as a currency Image
3/ Like other currencies, #gold prices are volatile despite safe heaven backdrop... Image
Read 20 tweets
Few important points considering #Centralbanks . A thread.

"When central bank accrues a loss beyond its stream of net interest rate income (gross interest income minus expenses) and seigniorage, it starts to eat through its capital." 1/12
@GnSEconomics Image
"A central bank thus follows normal accounting practice.

But, because the central bank has a control over the monetary base, it can create demand for its liabilities (currency) by buying government securities and earn seigniorage." 2/
"This is the crucial difference between a central bank and a commercial bank.

The central bank can claim to be solvent, based on its future income stream from seigniorage, even with negative net worth." 3/
Read 12 tweets
The #Fed Playbook
Oct. 17, 2020

The Federal Reserve is back in business.

So I guess it's time for a thread. 👇👇👇

1/ This week the balance sheet stands at $7.15 trillion which is close to its all time high.

But new records are incoming.
2/ Since the start of the #Fed intervention this year they have added $2.9 trillions to the system.

Looks like a lot but in percentage terms it is a much smaller expansion than in 2008.
3/ After 2008, all that money added to the system has inflated the valuation of various financial assets but most of all the stock market.
Read 6 tweets
A lot of talk about the role of the #Centralbanks going forward.

I think now would be a good time to recap the market bailout operations during the past few years.

So, a thread on the 'stealth socialization' of the financial markets by the central bankers. 1/20
#Fed #ECB
In late November 2008, the U.S. Federal Reserve announced it would start buying the debt of Government Sponsored Enterprises and mortgage-related securities in the secondary market.

In March 2009, the Fed extended the program to include US Treasuries. QE -program was born. 2/
The #Fed ran three sequential QE -programs.

The Bank of England started its QE program in March 2009, the Bank of Japan (BoJ) in October 2010, the European Central Bank (ECB) in March 2015 and the People’s Bank of China (PBoC) in July 2015. 3/
Read 21 tweets
'Pulling #consumption forward' is an unhelpful euphemism for 'engaging in #capital consumption': more graphically, 'writing cheques the people can't cash'.
Self-sustaining #growth requires coherence between consumption & production not just today, but over time.
1/x #centralbanks
That latter is difficult enough to achieve without #centralbankers & policy-makers in general trying to impose their own vision of the balance (one always narrowly biased to the present) on a system composed of billions of interacting needs & preferences.
2/x
#bankofenfgland
The unavoidable (Rumsfeldian) uncertainty -as well as the calculable risks- is made much greater when every fluctuation today -itself a direct result of IN-coherence, largely inflicted from above- is greeted with yet another blunt-force trauma assault on the capital structure
3/x
Read 9 tweets
Negative Interest Rates #NIRP do more harm to #Centralbanks than they do good

Times are changing with hard cash to online digital payments
The world has been forced to adapt to new methods of online payment like #Debitcards , #creditcard and #mobilewallet payments
Few use cash and the global elites are using negative interest rates to do the same thing as inflation make money disappear
The U.S. discontinued the use of large-denomination bills in the late 1960s. Until 1969, $500, $1,000, $5,000 and even $10,000 bills were issued and today
the largest bill is a $100 bill, but it has lost 80% of its purchasing power since 1968

Europe has ended the 500 euro note and today the largest note in euros is 200 euros. Existing 500 euro notes will still be legal tender, but new ones will not be produced.
Read 12 tweets
Rise of the #CBDC: we just published a major analysis of drivers, #technologies and policy approaches. bis.org/publ/work880.p… [some details/thread]
We start by measuring the stance towards issuance in #centralbank #communication. We investigates the cross-country drivers, the technologies central banks pursue, and their policy approaches. #money #innovation #DLT
We examine how #centralbanks are involving the private sector in CBDC design, whether they employ a #DLT-based infrastructure, whether they opt for account-based access or #privacy-preserving #tokens, and whether their focus is on domestic or international #payments.
Read 6 tweets
Below you find our recent short-term GDP growth forecasts for the US, Eurozone and Finland.

The figures are very dire. We don't actually see any recovery for the next 2-3 years (detailed in our Q-Reviews).

Here's a short thread, why our view is so 'dark'. 1/7
@GnSEconomics Image
The economic hit of the #coronavirus has been just massive. Basically never in modern times have we seen so steep declines in GDP, which we witnessed in Q2 this year.

But, there are four issues, which have made our forecasts for the world #economy so dire. 2/
This first one is the fact that the growth already faltered in late 2019.

The Eurozone fell into a recession in Q4 2019, and the US economy would probably have fallen into one in Q1 2020, even without the (massive) impact of the #coronavirus pandemic. 3/
gnseconomics.com/2019/03/27/rec…
Read 7 tweets
The #Fed Playbook
Aug. 20, 2020

What's up with the Federal Reserve this week? Time fo a thread. 👇

1/ The balance sheet is back above $7 trillion. We are probably not going to go very much below that this year. ImageImageImage
2/ Since the start of the #Fed intervention this year that's $2.8 trillions added.

Sure that's a lot of money... but in percentage that's only a 65% expansion.

There is a lot more room for growth if we compare to what happened after the 2008 crisis. 🧐 ImageImage
3/ But the #FOMC doesn't really have a choice... #stonks need to go up... Image
Read 5 tweets
One noteworthy aspect of the #COVID19 market has been the success with which the #Fed & other #centralbanks have been able to stem the “Covid Crash” and then help control the recovery. The current backdrop reminds me a bit of the 1942-1946 #QE cycle. Let’s take a look. (THREAD)
1/ After the Great Depression, the government went into high gear during WWII and, in the process, ran up huge government debt. Federal debt as a percent of #GDP jumped to 116% from 39% during the 1st half of the 1940s.
2/ Not only did the Fed monetize the debt by increasing its balance sheet 10-fold, it repressed the entire #yieldcurve by capping short rates at 3/8% & long rates at about 2.5%. #Inflation ran up but, with the #Fed repressing rates at low levels, real rates went negative.
Read 24 tweets
The #Fed Playbook
Aug. 06, 2020

What's going on with Brrrr? Time for a thread. 👇

1/ Not much has changed for the Fed. Minus $4 billion on the balance sheet this week.

When your assets total $7 trillion that's barely visible. ImageImageImage
2/ In net value the size of the 2020 #FOMC intervention dwarfs what happened in 2008.

But in percentage term that is barely the beginning. 👇 ImageImage
3/ So far the US Federal Reserve is getting what they wanted. They have prevented a total meltdown of the stock market.

But investors aren't blind to the side effects of money printing: #gold and #Bitcoin are on the rise. Image
Read 5 tweets
The #Fed Playbook
Jul. 24, 2020

1/ Only $6 Billion added to the balance sheet this week.

This is so small compared to what happened recently that you can barely see it on the chart.

For now the balance sheet is sitting just below $7 Trillion. ImageImageImage
2/ Same as in 2008, after the initial emergency measures we have moved to the plateau phase of the balance sheet expansion.

The next step for the #Fed is to come up with a more permanent #QE program.

I wouldn't be surprised if we hit $10 Trillion this year. ImageImage
3/ At the same time the money supply continues to expand at an unprecedented rate.

M2 is up more than 20% this year. This is:
- 4 times higher than the average year
- 2 times higher than the largest M2 growth on record

If you haven't already it is time to consider #Bitcoin. Image
Read 4 tweets
The #Fed Playbook
Jul. 16, 2020

1/ After a few weeks of decline the Federal Reserve is adding a small $38 billion to its balance sheet.

The emergency measures are almost gone so we are now getting a good old regular asset purchase program. ImageImageImage
2/ We are entering the plateau phase of the #Fed playbook.

In 2008 during this period the balance sheet stayed around the same level until the #FOMC put in place a more permanent #QE program. Image
3/ Don't expect the #Fed balance sheet to go back down to "normal" levels, the #Stonks market cannot afford that... #Brrrr Image
Read 4 tweets

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