Liquidity 02 incl QE, Twist, LTRO, APP etc (Jun 14 - Dec 25)

[winston]

This ‘Chart of Doom’ Explains When A Global Recession Will Begin…

By Charles Hugh Smith

Source: Daily Reckoning

http://www.thetradingreport.com/2016/02 ... ill-begin/

[behappyalways]

Central banks' steroids aren't working
http://money.cnn.com/2016/03/10/investi ... index.html

[winston]

Stocks rally hinges on Fed's next move

The European Central Bank came up with a massive six-measure stimulus package on Thursday, that showed a determination to revive the economy and solve the problem of deflation.

ECB chief Mario Draghi's hint that a further rate cut is unlikely saw global stocks go into reverse after initial gains.

But a more careful analysis will show the action is well meant and appropriate.

The six measures include:
1. trimming all three main interest rates;
4. raising to 80 billion euros (HK$692 billion) from 60 billion euros its current monthly bond purchases;
5. expanding quantitative easing to highly rated corporate bonds; and
6. giving low-cost four-year loans to banks.

The last two moves were unexpected and meant it did not want to stimulate the economy just through rates.

However, the success of the ECB moves hinges on whether the US Federal Reserve is willing to cooperate by slowing down its pace of rate hikes.

For Chinese, Japanese and European moves to loosen monetary policy will not have much effect if the United States keeps going off in a different direction, as happened last year.

So, whether global financial markets will have a sustained upward trend depends on the upcoming Fed statement this month.

Source: Andrew Wong Wai-hong, The Standard HK

[behappyalways]

The Chinese economy bottomed in mid-2015 and has been slowly recovering. Credit is again growing at unhealthy double-digit rates. The Communist Party has put off the day of reckoning for another year by pulling the levers of stimulus. When that moment comes, it will be even harder to deal with, and by then the Fed will be on the war path making everything harder.


AEP: US inflation rears its ugly head as global cycle nears danger zone
http://www.telegraph.co.uk/business/201 ... ars-dange/

[winston]

Central banks look to get act together

by Andrew Wong Wai-hong

The US Federal Reserve last week hinted, to a certain extent, that it is unlikely to raise interest rates four times this year but that twice is reasonable. The dollar fell.

The market is worried that the currency depreciation policies of central banks are doomed. At the same time, it also means central banks' ability to control economies is lessening. For even if currencies continue to depreciate, will it really boost economic growth?

The biggest problem for many countries last year was that US monetary policy went against their own. That led to funds continually flowing from emerging markets into dollar assets. The main reasons for that: investors worried the interest spread would widen and the risk brought about by continuing devaluation.

Because continuous outflows offset the effect of positive factors such as rate cuts, countries would have to consider a change of policy to prevent flows to US dollar assets, which leads to global capital imbalances.

So even before the recent G20 summit, many central bank officials called for a stop to the continuous currency devaluations, at the same time pointing out that negative rates are a "zero-sum game."

As such, in the past month, cooperation has been ideal. First, Beijing lowered its capital reserves rate comprehensively. Then New Zealand cut rates again. Japan stopped promoting a negative rate policy. Europe advocated six stimulus policies. Last was the Fed hinting of a slowdown in rate increases this year.

That has prevented global capital flowing to the US again, and stocks and commodities are set for gains.

The only concern left is the strong yen. But it is a peak month for Japanese firms and fund inflows, so a strong yen is no cause for worry for investors for now.

Source: The Standard HK

[winston]

We’re Near the End: Central Banks Are Running Out of Options

By Lance Gaitan

Going into last week’s Fed meeting, the general consensus was that they would not raise rates. When they hiked rates by a quarter point in December, they projected there would be four additional quarter-point raises in 2016. That's starting to look fishy as we’re almost a quarter of the way through the year and there’s still no hike.

Sure enough, the Fed left rates unchanged as expected last week, and revised their rate expectations lower through 2016. Now, they anticipate only hiking another half point by the end of the year.

But the most interesting part of their policy statement had to do with why they lowered their projections. Rather than citing economic developments here at home as a “data dependent” Fed should do, they referred to global economic developments that are posing risks.

That tells me that the Fed is really just reacting to global currency maneuvers. Right after the Fed statement announcement – where they projected to have only two rate hikes this year, down from four – the U.S. dollar fell sharply against foreign currencies.

It’s going to be hard for the Fed to raise rates here while foreign central banks are easing and going negative with their rates. Just before the Fed and the Bank of Japan (BoJ) met, the European Central Bank (ECB) increased QE and moved rates further negative. And the BoJ adopted negative rates in their January meeting.

Since the Fed and the BoJ announced monetary policy last week and the ECB the week before, it’s probably a good time to look at what’s ahead for central bankers, especially the Fed.

The BoJ didn’t change monetary policy at their meeting last Tuesday. They were probably a little gun-shy after having their last action backfire when they announced a surprise negative interest rate move. They wanted to weaken their currency and move stocks higher and the opposite happened.

Then last week their currency got even stronger. The original thought was that by not increasing rates, the Fed wouldn’t pressure the yen. But the dollar fell against the yen and other currencies, making them stronger.

That’s when the BoJ intervened (again) by directly selling the yen in the open market, hoping to offset its earlier strength.

And the currency games continue…

The BoJ is probably running out of policy options. Despite decades of currency intervention, quantitative easing and now negative rates, they have failed to spur economic growth, consumer spending and inflation. Is this finally the end?

Japan started their monetary easing and quantitative easing decades ago. The Former Fed Chair Ben Bernanke followed suit in the wake of the financial crisis in 2008. Europe’s central bank tagged along later. China has been playing currency games for years.

While all of this central bank tinkering has affected some asset prices and currency valuations, there is no proof that it’s helped spur consumer spending, GDP growth or exports. In fact, China’s exports fell 25% over the last year while Japan was down 13%! Ouch!

Here at home, the Fed can claim that inflation is on track to hit 2% in the next year or so and can brag about low unemployment all it wants.

But those actually participating in the labor force have shrunk to levels not seen since the 1970s. The majority of the jobs growth has been in low-paying jobs, and wage growth has been non-existent.

Another important measure of our economic health is the manufacturing sector. The Institute for Supply Management’s (ISM) Manufacturing Index read below 50 for five straight months. That means an overall decline in orders, exports, employment and a lack in confidence in the business outlook. That’s deflation, folks.

Just like elsewhere in the world, there is no proof that central bank monetary policy actually works. It hasn’t helped to turn the tide in Japan, Europe, China or here at home. So why do central bankers keep doing something that they must know doesn’t work?

QE, bond buying, asset purchases, zero interest rates, negative interest rates, reserve selling, currency selling – all it achieves is to temporarily move some asset prices and currency valuations. But it has not spurred economic activity, employment, wage growth or even inflation.

Central banks are fighting losing battles. From aging and declining populations in Japan and elsewhere, to business cycles and bubbles, they’re dealing with forces beyond their control.

We are near the end though. Monetary policy tools have less and less impact. Central banks are running out of bonds to buy, interest rates can’t go too far below zero and outright currency manipulation will eventually lead to trade wars.

When central banks have shot their last policy bullets, maybe business will begin to normalize. Eventually, economies and wages will grow and lead consumers to spend, and we’ll reach a normal business cycle.

In the meantime, expect there to be plenty of market volatility, which means there will be plenty of opportunity to make money! Overreaction in long-term Treasury bond prices is one way Treasury Profits Accelerator readers profit.

Source: Treasury Profits Accelerator

[winston]

Are Central Banks Dropping Money From Helicopters?

Since 2008, global central banks have cut interest rates 637 times, they have injected 12.3 trillion dollars into the global financial system through various quantitative easing programs, and we have seen an explosion of government debt unlike anything we have ever witnessed before.

There are16 countries in Europe that are experiencing deflation right now.

During the November-January period, 378 of the S&P 500 companies bought back their own shares, according to FactSet. Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing 12 months (TTM), buybacks totaled $568.9 billion.

Source: Trading Report

http://www.thetradingreport.com/2016/03 ... licopters/

[winston]

Here’s your proof that Fed moves give stocks a huge boost

Easy-money policy supports the U.S. market — for now

Markets move higher before Fed decisions — regardless of what those decisions are.

So the Fed’s influence doesn’t come so much from the actual lower rate it has imposed as from the stoking of “animal spirits” with its announcements.

In other words, the Fed has had an effect, but it’s arguably more psychological than mathematical.

Source: Market Watch

http://www.marketwatch.com/story/heres- ... eid=yhoof2

[winston]

BIS Data Shows China Risk to Financial System

By Valentin Schmid

At this moment, Chinese citizens and companies are still trying to get their money out of the country and are happy to do so with the help of Chinese banks.

If that situation changes and Chinese players want to hold their dollars outright or need to service debt obligations in yuan because of a falling economy, this liquidity could very quickly disappear from the global financial system.

Source: Epoch Times

http://www.theepochtimes.com/n3/2086935 ... al-system/

[winston]

Kyle Bass: A top central banker once told me something that he'd never say public

Quantitative Easing only works when you’re the only country doing it

In the end, Bass thinks central bankers will move to an even more aggressive easy policy referred to as helicopter money.

He also focuses heavily on China, which he’s predicted will have a meltdown greater than the 2008 financial crisis.

Source: Yahoo Finance

http://finance.yahoo.com/news/thing-top ... 00371.html