BACKDOC: IT DOESN'T TAKE A MENTAL GIANT TO FIGURE OUT THAT DEFLATION IS KILLING THE BANKS.
THE BANKING WORLD WON'T EVEN USE THE WORD DEFLATION, JUST LIKE A WORLD LEADER CAN'T SAY THE WORD ISLAMIC TERRORISTS! HEE HEE
ITS OBVIOUS THE SYSTEM IS ABOUT TO COLLAPSE WITHOUT SOME SORT OF BAILOUT!: DOC IMO
ThunderHawk » February 5th, 2016
Over a Fifth of Global GDP is Now Covered by a Central Bank With Negative Rates
The world’s economies are going negative.
Over a fifth of global gross domestic product, or 23.1%, will now be produced in countries that have negative interest rates.
On Friday, the Bank of Japan 8301.TO -1.03% became the latest to join, cutting the rate it charges banks on new excess reserves to minus 0.1%. The rate on reserves is currently 0.1%, and existing holdings at the central bank will still carry that rate of interest.
In the middle of 2012, the Danish central bank, the Danmarks Nationalbank, moved its deposit rate into negative territory.
Two years later, the European Central Bank and Swiss National Bank SNBN.EB +1.98% moved into negative territory and Sweden joined the club in early 2015.
The moves come as central banks in both Japan and Europe struggle to return inflation to target levels, and are looking at increasingly unconventional policies to do that.
The ECB and BOJ together are responsible for around 21% of global GDP. Swiss, Swedish and Danish GDP add up to less than 2.5% of the global total.
So far the moves to negative interest rates have been relatively shallow, with almost all set at less than minus 1%.
But even if the size of the move isn’t dramatic, the fact that banks are willing to do this is. Never before have so many central banks explored sub-zero territory at the same time. That’s leading analysts to predict that negative rates could be an important tool in any future crises.
Correction: The share of global GDP covered by central banks with negative rates is 23.1%, not 23.3%.
http://blogs.wsj.com/moneybeat/2016/01/ ... d=yahoo_hs
Thunderhawk: Are global markets losing faith in central banks?
There’s never been a shortage of criticism—much of it wildly misplaced—when it comes to quantitative easing and other extraordinary measures launched by central banks in the wake of the financial crisis. But recent events have market watchers worrying that central bankers are starting to lose their ability to steer markets.
While the Bank of Japan’s surprise decision Friday to push interest rates into negative territory had the desired effect of sending the yen USDJPY, +0.07% and bond yields TMUBMUSD10Y, +0.02% lower and allowed the Nikkei index NIK, -1.32% to ultimately end higher, the market volatility that followed the move didn’t reflect the kind of market confidence the central bank undoubtedly wanted to see, said Michala Marcussen, global head of economics at Société Générale, in a Sunday note.
See: Bank of Japan negative rate decision a mark of desperation.
The wildest predictions of central bank critics never came to pass (remember how QE was going to lead to the collapse of the dollar DXY, +0.05% and turn the U.S. into Zimbabwe?). Marcussen’s critique isn't along those lines.
She notes, instead, that “solid central bank credibility was long taken as a given.” What’s changed is that with many central banks continually undershooting their inflation targets despite extremely accommodative monetary-policy measures, there is a growing worry that the ability of monetary policy to affect the real economy is somehow impaired.
There are a number of potential causes running from stubbornly high levels of debt, financial regulation, a “race to the bottom” in foreign exchange rates and weak global growth, she notes, adding that the collapse of an emerging-markets and commodity-credit bubble have added another obstacle.
Marcussen is hardly alone in worrying whether central banks are running out of road. In his new book, “The Only Game In Town: Central Banks, Instability and Avoiding the Next Collapse,” economist Mohamed El-Erian credits central banks with averting a global economic catastrophe in the wake of the financial crisis but lack the tools to engineer a return to high inclusive growth and financial stability.
As Marcussen notes, so far central banks have so far been highly successful in stabilizing and even boosting financial asset prices. While critics have made much of the gap between the often sharp rise in the value of financial assets and lackluster growth in the real economy, “it should be quite clear that should financial stability also be threatened, then the chances of economic recovery would dwindle into nonexistence,” Marcussen wrote.
What’s worrying, she says, is that recently, “the market response to renewed central bank action no longer seems to carry quite the same punch. The weeks ahead will bring an important test hereof.”
http://www.marketwatch.com/story/are-gl ... 2016-01-31
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Thunderhawk: Negative yields coming soon to corporate bonds?
Negative rates are all the talk again after the Bank of Japan last week surprised investors by announcing it would charge banks to park a portion of their excess reserves. Now, some see the potential for some European corporate bonds to join the negative-yield party.
See: What you need to know about the Bank of Japan and negative interest rates.
Deutsche Bank DB, +1.86% strategist Jim Reid, in a Tuesday note, observed that such a phenomenon would go against the widely held perception that investors won’t buy corporate bonds with a negative yield.
Investors typically use government securities as the reference point when it comes to corporate yields. The spread, measured in basis points, is the yield premium demanded by investors to hold corporate debt over government debt, which are typically perceived as safer.
The perceived reluctance of investors to buy negative-yielding corporate debt would mean that a further dive into sub-zero yield territory by European government bonds would lead to wider spreads.
Recent evidence, however, doesn’t support the case, Reid said, noting that 1-3 year and 3-5 year euro AA spreads have remained range bound over the last six months while 2- and 4-year yields on German government bonds, or bunds TMBMKDE-10Y, -4.25% have pushed deep into negative territory.
“Our central view is that zero might be a temporary resistance point if government yields rally further but that at some point the dam will break and corporates will trade on a spread basis and go sub-zero,” Reid wrote.
As the chart from Deutsche Bank below shows, a significant proportion of shorter-maturity corporates are already flirting with zero.
“Clearly, it’s not as big a market, but the zero bound didn’t hold for corporates here,” he said.
http://www.marketwatch.com/story/story? ... 99aa23423a
BACKDOC: IF OUR NEW NARRATIVE MEANS SOMETHING AND OIL DOES DECOUPLE BASED ON MY THOUGHTS I SHARED, OIL WILL SOON MAKE A RECOVERY REGARDLESS OF SUPPLY AND DEMAND BECAUSE CONTRACTS WILL DETERMINE PRICES ALONG WITH A HUGE CHANGE IN DOLLAR/YUAN VELOCITY CHANGES! DOC IMO
Thunderwawk: Citi: 'We Should All Fear Oilmageddon'
Markets are currently in a well-oiled "death spiral," according to Citigroup Inc. analysts led by Jonathan Stubbs.
"It appears that four inter-linked phenomena are driving a negative feedback loop in the global economy and across financial markets," the analysts write, citing the resilient U.S. dollar, lower commodities prices, weaker trade and capital flows, and declining emerging market growth.
"It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks," the analysts add. "Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon."
Their case is bolstered by a collection of charts showing the linkages between the four factors cited above, including the importance of lofty oil prices to the ready supply of petrodollars circulating in the world economy and flowing to financial assets. Oil exporters have enjoyed more than $6 trillion flowing into their current accounts, according to Citi's estimates, implying some $4 trillion of capital in sovereign wealth funds (SWFs).
"But, the collapse in oil/commodity prices and sharp fall in the pace of world trade means that these same economies will likely experience an aggregate current account deficit for the first time since 1998," says Citi. "In turn, this is likely to put pressure on SWF and broader emerging market liquidity as governments and emerging market economies would need to 'lean' on reserves in order to maintain economic, political and social stability. This has clear feedback loops across emerging markets."
Accordingly, the impact of the feedback loop is being felt far and wide in financial markets, extending even to U.S. inflation expectations. Where once 10-year inflation breakevens had little relationship with the price of oil they have for the past two years moved in tandem.
With house forecasts for a 4 percent strengthening of the trade-weighted U.S. dollar and oil prices at $50 a barrel by the end of the year, Citi offers some hope that the feedback loop can be partially reversed though not necessarily broken. Should the bank's base case of stabilizing currency and commodities markets materialize, the analysts say, financial assets should respond accordingly and recover.
However, a move "the other way would add fuel to a 'significant and syncronised' global recession," the bank warns warns.
"We should all fear Oilmageddon," Citi concludes. "Global recession, as we define it, would leave nowhere to hide in equities. Cash wins."
http://www.bloomberg.com/news/articles/ ... ilmageddon
BACKDOC: JUST A WORD FOR OUR FUTURE, BUYING STORABLE FOOD IN LARGE QUANTITY WOULD BE SMART IN MY BOOK! BLESSINGS DOC IMO
Thunderhawk: Zimbabwe to Declare National Emergency Over Food Shortages
Zimbabwe’s government plans to declare a national emergency over food shortages as the United Nations warned the situation is worsening at an “alarming” pace and price-spikes for basic commodities are looming.
“We are going to announce to the world the hunger we’re facing,” Vice President Emmerson Mnangagwa told lawmakers in the capital, Harare, on Thursday. “We have drought in this country and it is a pending disaster,” he said. President Robert Mugabe will make the announcement in days, he said.
Zimbabwe is facing the worst drought in almost two decades, which cut agricultural yields and farmers are losing their cattle as watering holes and pastures dry up. The government has earmarked $200 million for food imports and signed agreements to buy at least 100,000 kilograms (100 metric tons) of corn from neighboring Zambia, said Mnangagwa.
About 1.5 million of Zimbabwe’s 12 million people currently need emergency food assistance, and that number may triple this year, said Social Welfare Minister Prisca Mupfumira on Feb. 1.
“The situation is deteriorating at an alarming rate," Eddie Rowe, an official with the UN’s World Food Programme, said in Harare on Feb. 2.
The drought has also affected South Africa and Zambia, the region’s biggest corn producers respectively.
http://www.bloomberg.com/news/articles/ ... -shortages
BACKDOC: GOOD NIGHT FAMILY! IT WAS FUN SHARING SOME GOOD NEWS AND SOME STRATEGIES THAT IMPACT THE GLOBAL MONETARY REFORM!
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