Chancellor: Negative rates, negative implications

By Edward Chancellor
February 12, 2016

The latest weapon brandished by central banks is supposed to boost economic growth and ward off deflation by punishing cash hoarders. In practice, this radical policy damages credit creation, fuels bubbles, threatens civic freedoms and spooks the living hell out of markets.

Dear Draghi: Time to buy bank bonds

February 12, 2016

Bank shares have slumped and bank bond yields are up. ECB chief Mario Draghi can stop the rout from damaging the economy by buying lenders’ debt. The moral hazard concerns are big, but manageable. Breakingviews imagines a memo from a bank CEO.

Fed stress-tests idea of negative interest rates

February 2, 2016

That’s part of the “severely adverse” scenario that big U.S. banks have to run this year to satisfy regulators. The ECB and now the Bank of Japan are giving it a try. The Fed has started pushing rates upward – but going negative is becoming a very plausible downturn assumption.

New Greek opposition leader may cause instability

By Hugo Dixon
January 11, 2016

The election of Mitsotakis, a liberal reformer, as leader of the centre-right New Democracy party means PM Tsipras now faces a credible opponent. While this is in Greece’s long-term interests, it raises the risk of short-term clashes between Athens and its euro zone creditors.

Giants of central banking will be cut down to size

December 30, 2015

The limited power of the Draghis and Yellens of the world is evident. They can’t conjure up inflation and the market impact of unorthodox monetary policies has waned. Rate-setters did their bit to support the global economy. It’s time fiscal and wage policies did more work.

Euro banks’ post-Fed good cheer looks short-lived

December 17, 2015

European bank shares are up after the U.S. rate rise, aided by hints that future increases will be gradual. But EU rates won’t follow anytime soon, and $9.8 trln of non-U.S. dollar credit could get harder to service. Nor is the pace of future Fed hikes set in stone.

The Fed may be cutting rates again within a year

December 17, 2015

With official U.S. money finally costing something, there’s a risk that market overreaction saps funding in emerging markets and hurts exports as global demand softens. While a swift retreat might be insignificant on paper, it would harm the central bank’s credibility.

Fed liftoff will reinvigorate key market gauges

December 15, 2015

Everyone used to watch fed funds futures like hawks (or doves). Seven years of zero rates made them a less important indicator. Along with Eurodollar futures and other traded hints on rates and inflation, though, they are due fresh attention – even if their meaning has morphed.

Pimco has chosen the wrong celebrity advisers

December 8, 2015

The $1.5 trln asset manager’s new advisory board includes former UK premier Gordon Brown and ex-Fed Chair Ben Bernanke. Their past errors are worth learning from. But people who spotted trouble coming, such as Raghuram Rajan, India’s central bank chief, would serve Pimco better.

Review: Another “Minsky moment” may be on the way

By Edward Chancellor
November 27, 2015

Hyman Minsky didn’t just predict the global financial crisis 10 years in advance, a new book on him argues. The maverick economist also explained how the cure – bailouts by the Federal Reserve and other central banks - would drive the financial system to the brink yet again.