What is next for central banks?

padington

DiggerUK wrote: »

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..._

Let's hope they're still there. General security may start getting a little tricky soon, all the phones are going to come with geo thermal technology, starting this year. It might begin weak but before you know it, an empty house might become a little obvious all too soon.

DiggerUK

Well, we know what the ECB is going to do.....it's gone and done it.
Another €20b on top of the current €60b each month, overnight deposits on -0.4%, and as much as you can eat for 0.00%, (I've rounded that figure off to two decimal places)..._

mwpt

DiggerUK wrote: »

Well, we know what the ECB is going to do.....it's gone and done it.
Another €20b on top of the current €60b each month, overnight deposits on -0.4%, and as much as you can eat for 0.00%, (I've rounded that figure off to two decimal places)..._

Buy houses in desirable areas is Europe.

michaels

How about wheel-barrows? Europeans aren't really into putting everything on plastic and with negative returns for deposits in the bank that leaves a lot of notes to be carted around....

mwpt

HAMISH_MCTAVISH wrote: »

And 'stuff' will only be made if 'stuff' can be 'consumed'.

Which requires consumers with money.... 'Funny' or otherwise.;)

It is my view that this is a mild version of a centrally planned economy, the resulting distortions will cause more harm in the long run.

We probably would have had a period of more sharp pain if 2008 credit bust had been allowed to unfold in the true darwinian sense, but we probably would have been in a better position today. Instead central banks saved "us" by saving those that would have been eliminated and we are still relying on "the only game in town", central bank stimulus (which includes low rates).

The ECB just fulfilled the top two of my predictions. If this doesn't work, where next. Will we see monetising of the debt?

Generali

mwpt wrote: »

It is my view that this is a mild version of a centrally planned economy, the resulting distortions will cause more harm in the long run.

We probably would have had a period of more sharp pain if 2008 credit bust had been allowed to unfold in the true darwinian sense, but we probably would have been in a better position today. Instead central banks saved "us" by saving those that would have been eliminated and we are still relying on "the only game in town", central bank stimulus (which includes low rates).

The ECB just fulfilled the top two of my predictions. If this doesn't work, where next. Will we see monetising of the debt?

It's too late and I've too long a week to expand right now but I'm not sure that the current central bank policies are a mild version of a centrally planned economy. I think we're starting to see some misguided people with big egos engage in some mildly brutal financial repression.

Interest rates should not be here at this point in the cycle. It's nuts and anyone that thinks this is normal is wrong. 300 years of Central Banking tells us that.

DiggerUK

Generali wrote: »

?........ It's nuts, and anyone that thinks this is normal is wrong.........

It is perfectly understandable, even if it isn't normal. And states have always planned their economies since states began.
The plans adopted only go away from the norm, when problems grow to levels that are not the norm.

Digger Mansions didn't take the strategic financial decisions it made because the world wasn't drastically changed. The belief of many around here that a return to normalisation is imminent, are simply ignoring the world as it is..._

mwpt

By the way, it sounds very likely that more QE of some form is on the way for the UK. Quoted from The Guardian:

The new chancellor Philip Hammond says any immediate response to the surprise Brexit vote should come from the Bank of England.

Taking his first Treasury questions as chancellor, Hammond said he would unveil fiscal plans to deal with a possible slowdown in the autumn.

The initial response to this kind of shock must be a monetary response delivered by the Bank of England.

And the governor, announcing that interest rates were not to be lowered last week, did make it clear that the Bank is developing a monetary package that it will announce in due course.

mwpt

So basically, we're approaching the bottom of the curve on the effect that lowering interest rates can deliver. There is in theory no upper limit to QE though, and it can take a variety of forms.

Letting my imagination run wild, the world as we know seems fundamentally changed. We seem to be in a new paradigm of tapering growth in the west as we start to share more resources with the developing nations. Politicians are trying to find a way to manage this and still get voted in.

Crashy_Time

mwpt wrote: »

Buy houses in desirable areas is Europe.

The next stage is stop buying houses at silly prices. Unfortunately you bought at the wrong time.