BoE & ECB Rate cuts today

Économiste Monétaire

I thought this could serve as your ubiquitous rate-cut prediction thread. BoE and ECB are expected to cut rates today. The Central Bank of Sweden cut rates by 175 basis points this morning. As we know, the ECB is more conservative in rate cutting, so I wouldn't expect more than 75 basis points of a cut; more likely there will be a 50 basis points cut going by history--unless their monetary analysis dept. have some quite depressing advice for the Gov. Council. Inflation (measured by the HICP) dropped to 2.75 for November and will probably fall further as the recession becomes prolonged, and commodity prices falling further.

For the BoE, the predictions seem to be a 100 basis point cut, down to 2% which would be the lowest level since 1951. If it were to fall below 2% it would be the lowest rate in the BoE's operational history, since 1694. Mervyn King appeared quite pessimistic about the possibility of deflation in his last report when they cut rates from 4.5% to 3%.

So to sum up:
ECB: 50-75 basis points
BoE: 100 (+) basis points

Any other wild ideas are welcome... :pac:

mike65

Will this boost the euro a bit relative to Sterling?

Économiste Monétaire

mike65 wrote: »

Will this boost the euro a bit relative to Sterling?

It has already done so:
http://www.bloomberg.com/apps/news?pid=20602081&sid=a6mfGpoiO77k&refer=benchmark_currency_rates

bloomberg wrote:

The British pound dropped to an all-time low against the euro as economists forecast the Bank of England will cut the benchmark rate by 1 percentage point. The yen gained versus all the major currencies as central banks in Sweden, New Zealand and Indonesia cut rates to stem a global economic slowdown, making the low-yielding Japanese currency more attractive.

mike65

More pressure on patriotism then.

Économiste Monétaire

mike65 wrote: »

More pressure on patriotism then.

:P

The BoE has cut rates to 2%, a 100 basis point cut.

cavedave

So to sum up:
ECB: 50-75 basis points
BoE: 100 (+) basis points

If we still had a central bank setting interest rates what do you think our interest rates would be? I think we could have ended up in a situation like Iceland if we still had the punt, so interest rates would be a minor problem.

But in general would Ireland be better with an interest rate lower then the ECB one at the moment or is the current level about right?

mike65

If Ireland were stilll floating free we'd have sunk.

Économiste Monétaire

cavedave wrote: »

If we still had a central bank setting interest rates what do you think our interest rates would be? I think we could have ended up in a situation like Iceland if we still had the punt, so interest rates would be a minor problem.

But in general would Ireland be better with an interest rate lower then the ECB one at the moment or is the current level about right?

Well, avoiding the Iceland point, I would be of the view that we require a lower interest rate. An asset bubble has (or is) burst(ing), we're in line for a possibly deepening recession, and the money supply is falling. Off the top of my head, we would need a 2% rate and, considering market conditions, a reduction to 1% early next year. After that, further monetary policy is pretty ineffectual so we would require a reasonable fiscal shock (granted all the problems with fiscal policy.)

Remember, monetary policy is near pointless if banks aren't lending, and people are hoarding cash (so your velocity falls.) On the whole, we're pretty lucky that we're in the Eurozone, in my view, considering what could have happened.

Économiste Monétaire

Well, the ECB has cut rates by 75 basis points, to 2.5%.

BenjAii

Économiste Monétaire wrote: »

Remember, monetary policy is near pointless if banks aren't lending, and people are hoarding cash (so your velocity falls.).

This is the bit that confuses me in the current situation. So presumably prior to 2008 interest rates were the one variable under CB's direct control, amongst a jumble of variables like inflation, exchange rates etc, that it tried to use Goldilocks like to get the economy "just right".

In that way of thinking, lower interest rates made borrowing by business cheaper, therefore led to more investment which led t growth, notwithstanding unwanted effects such as inflation.

Except as we all know this model has fallen apart somewhat, as businesses cannot respond to lower rates as banks for their own reasons restrict lending.

In which case why are central banks still using this old tool & expecting it to work as it did prior to the financial crisis ? aren't they just sticking their heads in the sand & hoping for the best ?

Économiste Monétaire

BenjAii wrote: »

This is the bit that confuses me in the current situation. So presumably prior to 2008 interest rates were the one variable under CB's direct control, amongst a jumble of variables like inflation, exchange rates etc, that it tried to use Goldilocks like to get the economy "just right".

In that way of thinking, lower interest rates made borrowing by business cheaper, therefore led to more investment which led t growth, notwithstanding unwanted effects such as inflation.

Except as we all know this model has fallen apart somewhat, as businesses cannot respond to lower rates as banks for their own reasons restrict lending.

In which case why are central banks still using this old tool & expecting it to work as it did prior to the financial crisis ? aren't they just sticking their heads in the sand & hoping for the best ?

Well, central banks don't have complete control over market interest rates. They attempt to influence, for example, EONIA and EURIBOR rates with their own MRIR/minimum bid rates. If banks aren't operating properly then the central bank's ability to influence the market rates diminishes. In more technical terms, the transmission mechanism of monetary policy, how the central bank influences the economy as a whole, falters.

Interest rates are their main tool, they don't have much else to use--except for extending standing facilities like the Fed has with the numerous new financial acronyms since the crisis began, i.e. PDCF, MMIFF, TAF, TSLF, CPFF, et cetera They play with the tools the gods give them, which alone isn't sufficient in these circumstances.

silverharp

Économiste Monétaire wrote: »

Well, central banks don't have complete control over market interest rates. They attempt to influence, for example, EONIA and EURIBOR rates with their own MRIR/minimum bid rates. If banks aren't operating properly then the central bank's ability to influence the market rates diminishes. In more technical terms, the transmission mechanism of monetary policy, how the central bank influences the economy as a whole, falters.

Interest rates are their main tool, they don't have much else to use--except for extending standing facilities like the Fed has with the numerous new financial acronyms since the crisis began, i.e. PDCF, MMIFF, TAF, TSLF, CPFF, et cetera They play with the tools the gods give them, which alone isn't sufficient in these circumstances.

The media and gov. dont seem to understand these facts very well. In as much as there are "laws of physics" in the economics arena , the "pushing on a string" argument is about as real as it gets. Short of putting a gun to the heads of consumers and promising them they are going to destroy the currency, the natural and correct thing for consumers to do now is to save and rebuild their balance sheets.

Économiste Monétaire

silverharp wrote: »

The media and gov. dont seem to understand these facts very well. In as much as there are "laws of physics" in the economics arena , the "pushing on a string" argument is about as real as it gets. Short of putting a gun to the heads of consumers and promising them they are going to destroy the currency, the natural and correct thing for consumers to do now is to save and rebuild their balance sheets.

Aye, the power of monetary policy alone is often over stated, especially in today's conditions.

Just listening to Trichet now. The ECB economic analysis dept. are projecting 0 per cent growth for 2009 and he appears to be hinting at further rate drops due to a continuing fall in the HICP. However, he's not projection deflation (he didn't mention it by name,though) with projected HICP of around 1 to 1.5%. Of course, all that's conditional on ceteris paribus.

silverharp

Économiste Monétaire wrote: »

Just listening to Trichet now. The ECB economic analysis dept. are projecting 0 per cent growth for 2009 and he appears to be hinting at further rate drops due to a continuing fall in the HICP. However, he's not projection deflation (he didn't mention it by name,though) with projected HICP of around 1 to 1.5%. Of course, all that's conditional on ceteris paribus.

Their rise during the summer appears to have been a huge mistake, not that it had a big effect, just seemed their judgement was off and not very forward looking.

Économiste Monétaire

silverharp wrote: »

Their rise during the summer appears to have been a huge mistake, not that it had a big effect, just seemed their judgement was off and not very forward looking.

Their sole mandate is price stability, and with commodity prices rocketing upwards they really had no other choice, and in fairness most people didn't know how bad all this would get. In hindsight, we can say it wasn't such a good idea, but at the time it followed the paradigm of price stability.

BenjAii

I wonder are the bank recapitalisations that are supposed to be still happening going to be the vehicle used to facilitate (force) increased bank lending.

silverharp

Économiste Monétaire wrote: »

Their sole mandate is price stability, and with commodity prices rocketing upwards they really had no other choice, and in fairness most people didn't know how bad all this would get. In hindsight, we can say it wasn't such a good idea, but at the time it followed the paradigm of price stability.

With my investor hat on I was looking at various monetary aggregates over the year and I couldnt see a ramp up in inflation. I dont expect central bankers to be market timers but they would be better served looking at money supply and not the limited consumer inflation that they are fixated with.



Something to think about

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."

book smarts

Yes, lets drop interest rates again, because we don't need to have recessions anymore. Lets all get into even more debt.

Économiste Monétaire

silverharp wrote: »

With my investor hat on I was looking at various monetary aggregates over the year and I couldnt see a ramp up in inflation. I dont expect central bankers to be market timers but they would be better served looking at money supply and not the limited consumer inflation that they are fixated with.



Something to think about

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."

I already know your views on the money supply, and you know I think the Austrian view is unrealistic To the point, they were required to control inflation and the tools they have to do that is interest rates. The rear view mirror is far clearer than the windscreen.

book smarts wrote: »

Yes, lets drop interest rates again, because we don't need to have recessions anymore. Lets all get into even more debt.

We're in a recession already. Welcome to today.

book smarts

Économiste Monétaire wrote: »

We're in a recession already. Welcome to today.

Greenspan and Co. thought throughout the 90s that they could stave off recessions with their incessant rate cuts. All their previous interest rate cuts couldn't stop it, merely postpone it. In the end they've made it worse. There should have been a proper recession after the dot com bubble. This rate cut is an attempt to "revive the economy" but all it's going to do is inflate the debt bubble even more.

The sooner the recession is embraced, the better. But noone wants to face it.

silverharp

Économiste Monétaire wrote: »

I already know your views on the money supply, and you know I think the Austrian view is unrealistic To the point, they were required to control inflation and the tools they have to do that is interest rates. The rear view mirror is far clearer than the windscreen.

Dont worry, I dont expect them to get religion , however as they had started bailing out banks at this stage, it would seem odd to focus on past inflation at that stage when they must have known that a rate cutting cycle was close at hand. It seemed a bit arrogant that they thought they could avoid what had already kicked off in the US and UK?

cavedave

Économiste Monétaire
The rear view mirror is far clearer than the windscreen.

You should try using the rear view mirror i promise you you wont look back.....

Économiste Monétaire

book smarts wrote: »

Greenspan and Co. thought throughout the 90s that they could stave off recessions with their incessant rate cuts. All their previous interest rate cuts couldn't stop it, merely postpone it. In the end they've made it worse. There should have been a proper recession after the dot com bubble. This rate cut is an attempt to "revive the economy" but all it's going to do is inflate the debt bubble even more.

The sooner the recession is embraced, the better. But noone wants to face it.

Your anti-discretionary policy makes no sense, and holds no ground in rational thought. If there was no monetary policy intervention to increase the money supply we would almost certainly have deflation. Now think what deflation means for borrowers, and think what that means for the debt level. Also, the NBER would disagree about the lack of a recession in '01. Embrace a recession? :rolleyes: If you mean that people should take this time to alter their high credit spending pattern, then yes.

silverharp wrote: »

Dont worry, I dont expect them to get religion , however as they had started bailing out banks at this stage, it would seem odd to focus on past inflation at that stage when they must have known that a rate cutting cycle was close at hand. It seemed a bit arrogant that they thought they could avoid what had already kicked off in the US and UK?

But the UK also had quite high rates too, only 32 days ago it was 4.5%. I completely understand where you're coming from and in hindsight there should have been greater scope for falling commodity prices. However, at the time the used the tools they had to achieve the objective laid out to them. They did the right thing under their mandate of price stability. The Fed doesn't have a sole mandate of price stability.

BenjAii

Interesting article in The Telegraph says that the BOE is considering using the printing presses to increase the volume of money in the economy, as cutting interest rates effectively do zero does not seem to be working.

http://www.telegraph.co.uk/finance/economics/interestrates/3551328/Bank-of-England-mulls-nuclear-option-of-cash-injection.html


It speculates this may be the case with the ECB too.

silverharp

BenjAii wrote: »

as cutting interest rates effectively do zero does not seem to be working.

I'd be amazed if they ever thought they would work. Any post bubble contraction has always involved falling interest rates (with rising spreads), falling asset markets and falling commodity markets. This contraction is ticking off all the boxes. Whatever they do house prices will keep falling

this couple must be laughing
http://news.bbc.co.uk/2/hi/uk_news/magazine/7657178.stm

Économiste Monétaire

We could be hitting the liquidity trap quite soon. The only solution then is:

book smarts

Économiste Monétaire wrote: »

Your anti-discretionary policy makes no sense, and holds no ground in rational thought. If there was no monetary policy intervention to increase the money supply we would almost certainly have deflation. Now think what deflation means for borrowers, and think what that means for the debt level. Also, the NBER would disagree about the lack of a recession in '01. Embrace a recession? :rolleyes: If you mean that people should take this time to alter their high credit spending pattern, then yes.

It could be argued that much of economics in general "holds no ground in rational thought", as you say. Economics is pseudo-science, at best, as discussed in that other thread. Look at the mess the Fed's policies have gotten the world into. Yet everyday these so-called "experts" appear on TV spouting jargon, when the truth is they haven't a clue. If they know so much why can't they even decide what to do? They daren't admit it though, because their careers are on the line.:rolleyes:

There was a recession in '01 but it wasn't proportional to the boom before it, they wouldnt let a proper one happen.

By embrace a recession I mean encourage saving and stop high credit spending, yes.

Économiste Monétaire

Rational thought, i.e. follow a logical path. You are arguing for non-intervention because it increases debt. Non-intervention, in the current scenario, leads to deflation. What does deflation do to peoples' debt? You're also arguing against interventionist policy for a body that regulates the money supply--that, too, makes no sense.

book smarts wrote: »

It could be argued that much of economics in general "holds no ground in rational thought", as you say. Economics is pseudo-science, at best, as discussed in that other thread. Look at the mess the Fed's policies have gotten the world into. Yet everyday these so-called "experts" appear on TV spouting jargon, when the truth is they haven't a clue. If they know so much why can't they even decide what to do? They daren't admit it though, because their careers are on the line.

You assume to know more than the entire Fed staff about the nuances of the U.S. economy? What Fed policies are you referring to, exactly.

book smarts wrote: »

There was a recession in '01 but it wasn't proportional to the boom before it, they wouldnt let a proper one happen.

Explain exactly how the recession wasn’t proportional. Where is this proportional value for boom and bust? Thanks.

silverharp

Économiste Monétaire wrote: »

Explain exactly how the recession wasn’t proportional. Where is this proportional value for boom and bust? Thanks.

just an obsevation here but one thing that was missing here was that consumers didn't save their way out of the recession. "Rational" people would do this however the gov. wanted them to be patriotic after911 and go out and buy a hummer lol:D

http://www.flickr.com/photos/28114165@N06/3082913754/

Économiste Monétaire

silverharp wrote: »

just an obsevation here but one thing that was missing here was that consumers didn't save their way out of the recession. "Rational" people would do this however the gov. wanted them to be patriotic after911 and go out and buy a hummer lol:D

http://www.flickr.com/photos/28114165@N06/3082913754/

That doesn't answer the question of what is a proportional recession, though. There is no hard rule for that, despite what the other poster believes. Of course, how much U.S. households borrow is near irrelevant if you believe in the whole global savings glut :pac:

Back to the point of the thread: Greg Mankiw has a little piece about impending deflation:
http://gregmankiw.blogspot.com/2008/12/deflation-alert.html

silverharp

Économiste Monétaire wrote: »

That doesn't answer the question of what is a proportional recession, though. There is no hard rule for that, despite what the other poster believes. Of course, how much U.S. households borrow is near irrelevant if you believe in the whole global savings glut :pac:

Back to the point of the thread: Greg Mankiw has a little piece about impending deflation:
http://gregmankiw.blogspot.com/2008/12/deflation-alert.html

Don't get me started on the savings glut. Re inflation targeting, I'll watch with interest which way it goes. Looking at the Irish situation, I cant see wage inflation being possible or real incomes rising, so at worst the ability of the consumer to consume will be reduced if prices are rising. Also I will be looking at inflation in the round, it really will not matter if the headline rate is 2% , if consumer wealth (property, stock market investments, pension fund assets) are dropping at a significantly higher rate. In the US the market will force consumers to cut back , the credit card market for instance looks ready to fall apart. interesting factoid, McDonalds became the 2nd biggest retailer for one of the credit card companies in the US, people are now borrowing to buy food?


will we get the alternative:D

Reserve Bank of Zimbabwe

http://www.rbz.co.zw/

Our Vision

To become the financial cornerstone around which Zimbabwe's economic fortunes and developmental aspirations are anchored.
Our Mission

The pursuit of the Bank's vision will express itself through leadership in the formulation, implementation and monitoring of policies and action plans for fighting inflation, stabilisation of the internal and external value of Zimbabwe's currency ....more>>

Économiste Monétaire

silverharp wrote: »

Don't get me started on the savings glut. Re inflation targeting, I'll watch with interest which way it goes. Looking at the Irish situation, I cant see wage inflation being possible or real incomes rising, so at worst the ability of the consumer to consume will be reduced if prices are rising. Also I will be looking at inflation in the round, it really will not matter if the headline rate is 2% , if consumer wealth (property, stock market investments, pension fund assets) are dropping at a significantly higher rate. In the US the market will force consumers to cut back , the credit card market for instance looks ready to fall apart. interesting factoid, McDonalds became the 2nd biggest retailer for one of the credit card companies in the US, people are now borrowing to buy food?


will we get the alternative:D

Reserve Bank of Zimbabwe

http://www.rbz.co.zw/

Our Vision

To become the financial cornerstone around which Zimbabwe's economic fortunes and developmental aspirations are anchored.
Our Mission

The pursuit of the Bank's vision will express itself through leadership in the formulation, implementation and monitoring of policies and action plans for fighting inflation, stabilisation of the internal and external value of Zimbabwe's currency ....more>>

I'd wonder by how much the delinquency rates on credit cards have increased over the last year. There was that amusing statistic floating around of how many credit cards the average American holds (including store cards), I wonder what the true figure is, and the average credit limit on each card. It will definitely be worth watching specific monetary aggregates and CPIs over the next few months--one waits in trepidation.

The quote from Zimbabwe CB is quite funny; Our mission: Fighting Inflation. Comical, at best. Also, The Economist's front cover this week is about savings :P : Where have all your savings gone?

Time Magazine

book smarts wrote: »

It could be argued that much of economics in general "holds no ground in rational thought", as you say.

Like?

Economics is pseudo-science, at best, as discussed in that other thread.

I disagree. Most of the critiques proposed in that thread -- well, at least those that weren't contradictory -- challenged economists' ability to predict. This is entirely different to our ability to prescribe.

Look at the mess the Fed's policies have gotten the world into.

Which Fed policies? Are you mixing up the Fed with the Clinton administration?

Yet everyday these so-called "experts" appear on TV spouting jargon, when the truth is they haven't a clue.

I have yet to see a respected monetary economist appear on TV, shy of Ben Bernanke. Would you like to back up the assertion that they haven't a clue, or are you going to just leave it there unsupported?

If they know so much why can't they even decide what to do? They daren't admit it though, because their careers are on the line.:rolleyes:

Medical professionals often disagree about the best course of action for a patient. If they know so much why can't they even decide what to do? Whose career is on the line? Bernanke's? Something tells me he's not all that concerned about his career, given that he's a very wealthy man. I think he's far more concerned about how history will judge him, given that he's also a very reasonable man with a deep interest in history. Thus his incentives are to do the right thing. Why do you think his career is on the line? Do you doubt his ability to walk back into a professorship in any university in the world, given that he's one of the most-cited economists ever?

There was a recession in '01 but it wasn't proportional to the boom before it, they wouldnt let a proper one happen.

By embrace a recession I mean encourage saving and stop high credit spending, yes.

Your focus on capital rather than productivity is mis-guided.

silverharp

Économiste Monétaire wrote: »

I'd wonder by how much the delinquency rates on credit cards have increased over the last year.

I remember When I was looking at this over the summer, 2 shoes that I thought would drop were Credit card debt & commercial real estate debt. I havnt really looked these since in any detail

you can follow the developments below



Consumers' Credit Card Limits Slashed as Companies Try to Reduce Risk

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html




American Express Delinquencies Hit 4.4%, Defaults 6.96%

http://www.bloomberg.com/apps/news?pid=20602007&sid=a.SS7_usmSqk&refer=govt_bonds

Économiste Monétaire

silverharp wrote: »

I remember When I was looking at this over the summer, 2 shoes that I thought would drop were Credit card debt & commercial real estate debt. I havnt really looked these since in any detail

you can follow the developments below



Consumers' Credit Card Limits Slashed as Companies Try to Reduce Risk

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html




American Express Delinquencies Hit 4.4%, Defaults 6.96%

http://www.bloomberg.com/apps/news?pid=20602007&sid=a.SS7_usmSqk&refer=govt_bonds

Thanks for the links. I know the American Bankers Association keep numbers on delinquencies, the last ones for CCs I can find are Q2 2008:

Credit card delinquencies rose just three basis points during the second quarter ended June 30, to 4.54% of total loans from 4.51% in the previous quarter, according to a report by the American Bankers Association. The credit card delinquency rate was 4.39% for the second quarter of 2007. The association's report defines delinquencies as payments that are 30 days past due. The federal economic stimulus payments earlier this year likely are the reason for just a slight increase in the delinquency rate, according to James Chessen, the ABA association's chief economist. "Having that financial shot in the arm appears to have helped some Americans pay off debt during the second quarter of 2008," Chessen says of the report's findings. "Borrowers are also being more cautious in adding to their overall debt, which is prudent in the face of a slowing economy," he adds. The composite ratio, which tracks eight closed-end installment-loan categories, such as credit card, auto and home-equity loans, rose six basis points, to 2.68% in the second quarter from 2.62% in the first previous quarter. The association attributes that increase largely to home-equity loan delinquencies, which jumped 22 basis points, to 2.56% from 2.34%.

I'm trying to find the more recent ones in full--it's difficult to wade through the ABA's banking journal junk, they usually give a concise version of their larger consumer credit delinquency bulletin, if I recall correctly.

silverharp

this is an extract fro Mark Fabers newsletter , take it at face value.


A friend of ours recently sent us the
following comment from Dr. G. Gono, chairman of the Reserve Bank
of Zimbabwe (no hoax):
"As Monetary Authorities, we have been humbled and have taken heart in
the realization that some leading Central Banks, including those in the
USA and the UK, are now not just talking of, but also actually
implementing flexible and pragmatic central bank support programmes
where these are deemed necessary in their National interests.
...That is precisely the path that we began over 4 years ago in pursuit
of our national interest and we have not wavered on that critical path
despite the untold misunderstanding, vilification, and demonization
we have endured from across the political divide.
...Here in Zimbabwe we had our near-bank failures a few years ago and
we responded by providing the affected Banks with the Troubled Bank
Fund (TBF) for which we were heavily criticized even by some multilateral
institutions who today are silent when the Central Banks of UK
and USA are going the same way and doing the same thing under very
similar circumstances thereby continuing the unfortunate hypocrisy that
what's good for goose is not good for the gander.
...As Monetary Authorities, we commend those of our peers, the world
over, who have now seen the light on the need for the adoption of flexible
and practical interventions and support to key sectors of the economy
when faced with unusual circumstances."

Économiste Monétaire

:eek: You know times are bad when the Zimbabwean CB is, in some small way, comparing their actions with the ECB's and the Fed's. Troubled Bank Fund = Monetizing the government's debt?

Digi_Tilmitt

The Economist wrote: »

Which Fed policies? Are you mixing up the Fed with the Clinton administration?

What do you mean by this? I would argue that the primary cause of the current crisis was interest rates that were too low for far too long which spurred an asset price bubble.

I find it difficult to see how you could connect the Clinton administration to current issues. In my own opinion that administration was a bastion of fiscal responsibility. They raised taxes and cut spending and were targeting paying off the USA's national debt by 2010.

The Economist wrote: »

Your focus on capital rather than productivity is mis-guided.

I believe his focus was against excess leverage and unsustainable debt

silverharp

Digi_Tilmitt wrote: »

I would argue that the primary cause of the current crisis was interest rates that were too low for far too long which spurred an asset price bubble.

where it gets interesting is the reasons why interest rates were artifically low

Time Magazine

Digi_Tilmitt wrote: »

What do you mean by this? I would argue that the primary cause of the current crisis was interest rates that were too low for far too long which spurred an asset price bubble.

That's far too simple an explanation. From what I can see, the main problem was one of agency: security systems were systematically played until they were no longer secure. This under-priced risk and led to a bubble.

I find it difficult to see how you could connect the Clinton administration to current issues. In my own opinion that administration was a bastion of fiscal responsibility. They raised taxes and cut spending and were targeting paying off the USA's national debt by 2010.

Pressuring a gigantic semi-state agency to provide mortgages to under-privileged families (i.e. sub-prime) is not being responsible. That said, neither was setting up Fannie and Freddie in the first place.

(And paying off national debt isn't necessarily such a great thing.)

I believe his focus was against excess leverage and unsustainable debt

Both of which relate to capital.