What is next for central banks?

mwpt

There is a lot of talk about central bank stimulus at the moment, particularly since we seem to be teetering on the edge of contraction and deflation rather than the intended impact of ultra low emergency rates.

Now the talk is of
- lower rates
- negative rates
- further QE
- people's QE
- monetising of government debt (ie. print some of government spending each year)

What does the forum think is likely as the next step and next few years?

One thing that strikes me, I could see all of them leading to further asset price inflation, which makes me grateful I bought a house when I did.

Of course, nothing is certain, the market could turn angry against government debt, but on this thread I'm interested in "what's next?".

Generali

mwpt wrote: »

There is a lot of talk about central bank stimulus at the moment, particularly since we seem to be teetering on the edge of contraction and deflation rather than the intended impact of ultra low emergency rates.

Now the talk is of
- lower rates
- negative rates
- further QE
- people's QE
- monetising of government debt (ie. print some of government spending each year)

What does the forum think is likely as the next step and next few years?

One thing that strikes me, I could see all of them leading to further asset price inflation, which makes me grateful I bought a house when I did.

Of course, nothing is certain, the market could turn angry against government debt, but on this thread I'm interested in "what's next?".

I can't see negative rates lasting long. It's playing havoc with the financial system and there is plenty of evidence appearing that negative rates actually make banks stop lending and instead reduce the size of their balance sheet which is exactly the opposite of the desired effect.

mwpt

Generali wrote: »

I can't see negative rates lasting long. It's playing havoc with the financial system and there is plenty of evidence appearing that negative rates actually make banks stop lending and instead reduce the size of their balance sheet which is exactly the opposite of the desired effect.

Agree about the last point.

HAMISH_MCTAVISH

They could try the one thing that is almost guaranteed to work, and that they really haven't tried on any kind of large scale, (except to a very limited extent Aus and the US).....

Filo25

More QE of some form or other.

michaels

How about inventing a new retrospective way in which something the banks have done broke consumer law so that bailouts directed at the banks such as QE are then transferred to consumers (preferably those who have previously demonstrated their high prospensity to spend all their income and more).....

mwpt

HAMISH_MCTAVISH wrote: »

They could try the one thing that is almost guaranteed to work, and that they really haven't tried on any kind of large scale, (except to a very limited extent Aus and the US).....

Yup, mentioned in top list, people's QE.

I think maybe most likely next step's if we get another growth contraction are, in this order:
- Cut rates a bit more
- Another round of QE (same as last time)
- Monetising of debt (print money for government to spend directly into economy)

I doubt we'd see people's QE soon, they're too scared of the narrative this sets. Could be completely wrong on that.

Does anyone see a tactic which results in a credit contraction and decreasing house prices?

Thrugelmir

What's next ?

I suspect very little. There'll come a point when market forces need to allow self correction. Combined with the fact that Central Banks have no ammo left.

mwpt

Thrugelmir wrote: »

What's next ?

I suspect very little. There'll come a point when market forces need to allow self correction. Combined with the fact that Central Banks have no ammo left.

Could be, could be.

The market will win in the end but, when? I'm not sure the CBs are out of ammo just yet.

Thrugelmir

mwpt wrote: »

Could be, could be.

The market will win in the end but, when? I'm not sure the CBs are out of ammo just yet.

What are expecting the CB's to do and with what outcome in mind?

Graham_Devon

I can't see peoples QE ever coming about to be honest.

Were too interested in big business in this country. People spending their helicopter money in Mary's Bakery on this high street is of no concern whatsoever to the government.

They will want to target QE at quick fixes. So anything that makes statistics look better. The quickest way to do that is to do the same things as they have done since 2008 - though this time expecting a different result.

The one thing this does show is you can't fix a debt problem with debt long term. Short term you'll get great results and we've had that. Anyone suggesting this was a recovery have now surely got to be asking the question of whether it was a natural recovery or simply a monetry boost. But medium and long term you are just kicking a very tired can.