Commentaries
Now raising intellectual capital
Is it time at last for a big exit?
Of its myriad stimulus programs, the Federal Reserve’s purchase of US Treasurys could be one of the first significant ones to expire as scheduled. The Fed could say as much when policy makers meet next week for their regularly scheduled two-day meeting.
The Bank of England could steal the Fed’s thunder by being first, though. The Bank could decide as early as tomorrow to halt its program that has hoovered up 125 billion pounds of debt with money hot off the printing presses. NYT says it’s a toss-up on whether it will end the program.
The programs have already lost their pop in the markets, but the symbolism of pulling out is huge and could provide clues into how well the financial markets can be weaned off government funds.
Throwing money from helicopters, Bank version
A bit late, I know, but this page is well worth a look if you haven’t seen it. If you thought there was a difference between the Bank of England’s sophisticated programme of Quantative Easing and throwing fivers out of a helicopter to a grateful populace, this diagram should convince you that they are much the same thing.
Pedants may point out that we’re not getting the dosh directly, and they’d be right, but when the government can print the money to dish out as benefits to the one-third of UK households which are now dependent on them, the difference is academic.
Is the ECB too cautious or too reckless?
The European Central Bank has long been criticised for being too cautious in its response to the financial crisis. Didn’t the inflation hawks of Frankfurt raise rates in July last year just as the credit crunch was about to reach its climax? Despite their massive injections of liquidity into the money markets, Jean-Claude Trichet and his colleagues were pilloried as timorous clones of the Bundesbank for cutting rates too slowly and refusing to follow the Fed and the Bank of England into Quantitative Easing by buying government and corporate debt.
But after last week’s helicopter dump of a record 442 billion euros in liquidity in one-year lending on demand to banks at its 1.0 percent refi rate against a broad range of collateral, the bank suddenly stands accused by some critics of being more reckless than the Anglo-Saxon central banks.
ECB outshines the Fed with its record funding
Though the Federal Reserve continues to capture the undivided attention of global markets, the real fireworks Wednesday were found across the Atlantic.
Where the Fed did essentially nothing, the European Central Bank pumped in a record Euro442 billion ($612.8 billion) through it’s first ever offering of 1-year funding at the low, low cost of 1%.
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The Wall
