What is next for central banks?

Generali

venison wrote: »

I wonder how many people believe the official figures? I for one don't., they are too full of holes.

What holes?

cells

Generali wrote: »

What holes?

The ones that go against my confirmation bias

Generali

cells wrote: »

The ones that go against my confirmation bias

That's pretty much what I was thinking.

I've got a crappy job and have most of my mates thus the economy is crap.

cells

Generali wrote: »

That's pretty much what I was thinking.

Its a very natural thing confirmation bias

I wonder if it has something to do with social inclusion. Thinking something even if it is wrong maybe beneficial if it keeps you within the group rather than expelled. The benefit or perceived benefits of the social group outweighing truth and fact

Generali

padington wrote: »

We had a touch of normalisation with a raise of US interest rates and markets went crazy, the Deutsch bank starting making weird announcements about it being solid as a rock and Donald trump may just about to become the most powerful person in the world while promising to bring back torture, ban Muslims and build a wall to keep the Mexicans out because the American middle and working class is mostly 'furious' about the economy. The Russians are going broke and looking dangerous. The Oil cartel have seemingly fallen out with each other. China seems to be struggling. Europe is looking like it might fall apart. Brexit might tear the UK apart. North Korea seems like its going to end in tears. South Africa looks a bit ropey. A large swaith of the Middle East is over run by fascists.

I'm not so sure there is much room to start taking money off the table.

The thing is, I think NIRP (Negative Interest Rate Policy) is taking money off the table.

Ultimately, money supply is normally created through credit creation. NIRP encourages banks to shrink rather than expand their balance sheets so it has the opposite effect from what Central Banks want. Increasingly there is evidence that as the economy normalises, ZIRP and NZIRP policies are doing the same thing as net interest margins shrink.

mwpt

Generali wrote: »

The thing is, I think NIRP (Negative Interest Rate Policy) is taking money off the table.

Ultimately, money supply is normally created through credit creation. NIRP encourages banks to shrink rather than expand their balance sheets so it has the opposite effect from what Central Banks want. Increasingly there is evidence that as the economy normalises, ZIRP and NZIRP policies are doing the same thing as net interest margins shrink.

We don't have NIRP in the UK, or most of the world for that matter. I could agree with what you're saying but combine it with QE and FLS and you've got a signal for the banks to expand their balance sheets.

I rather think it is the capital requirements regulations than are causing UK banks to contract their riskier lending, rather than LIRP policies.

Generali

mwpt wrote: »

We don't have NIRP in the UK, or most of the world for that matter. I could agree with what you're saying but combine it with QE and FLS and you've got a signal for the banks to expand their balance sheets.

I rather think it is the capital requirements regulations than are causing UK banks to contract their riskier lending, rather than LIRP policies.

It's worth remembering that banks don't just keep tier 1 reserves at Central Banks, they are also kept in Government bonds. According to Bloomberg, $7,000,000,000,000 (seven trillion dollars) worth of bonds now have negative yield.:think: Regardless of whether that is market led or due to Central Bank interventions (I'd argue it's a function of both an excess of savings and also of QE) the effect is the same: it's encouraging balance sheets to shrink.

IMHO of course.

DiggerUK

Problem states have with government bonds, is keeping them attractive to buyers. If returns carry on falling, there has to be a point when buyers go elsewhere to invest.
It's no use saying they're as sound as a pound if the returns don't materialise, that isn't what investors are after.

Now there is the rub for governments, they only raise funds by tax, selling state assets, booty of war, and borrowing.
It's not the bond vultures that are the threat, a far bigger threat is a refusal for anybody to buy. Bond investors going on strike!!!....perish the thought.

If anybody calls, I'm in the counting house, counting me gold coins..._

Thrugelmir

mwpt wrote: »

I rather think it is the capital requirements regulations than are causing UK banks to contract their riskier lending, rather than LIRP policies.

Basle III was originally going to implemented from 2013 to 2015 after being agreed in 2009. Then extended to 2018, then further extended to 2019. Banks have a little way to go yet.

regprentice

8 years ago a colleague of mine suggested something like peoples QE was the answer. His suggestion...instead of giving the banks money give every adult a prepaid debit card with a set amount credited on it.people get to spend and it goes to a diverse range of businesses.

Are banks reining in their riskier lending? I read interest only mortgages are back...self certified mortgages are back (if you want a mortgage with an eastern european bank).

I read an article suggesting the last collapse was a collapse in trust in banks...and the next one wil be a collapse in trust in central banks. How does that manifest itself... What hapens in the next collapse... A collapse in trust in government? Anarchy?