Englund

Friedman famously held the Fed responsible for the depth and duration of what he called the Great Contraction… in sharp contrast to hard-core laissez-faire opponents of Fed policy, who regarded even the mild and largely ineffectual steps taken by the Fed…  as illegitimate interventionism to obstruct the salutary liquidation of bad investments, thereby postponing the necessary reallocation of real resources to more valuable uses… Brad DeLong 27 April 2016

Once it punts again at the June meeting owing to Brexit worries it will have effectively pegged money market rates at the zero bound for 90 straight months. There has never been a time in financial history when anything close to this happened, including the 1930s.  Nor was interest free money for eight years ever even imagined in the entire history of monetary thought. So where’s the fire? What monumental emergency justifies this resort to radical monetary intrusion and repression? David Stockman 30 April  2016 Comment by Rolf Englund: Stockman writes that: The truth is, there can never by an honest shortage of “aggregate demand” because the latter is nothing more than spending for consumer and capital goods that is financed from the flow of income and production. As “Say’s Law” famously and correctly insists, “supply creates its own demand”. End cit We can read at Wikipedia that Say's law was generally accepted throughout the 19th century, though modi...

As I documented in The Great Deformation, total public and private debt at the end of 1938 amounted to 210% of GDP, but by the end of 1945 it had dropped to 190% of GDP.   David Stockman 28 April 2016 ”Det som satte stopp för trettiotalsdepressionen i USA var ett massivt underskottsfinansierat program för offentliga arbeten som kallas andra världskriget”. Carl Johan Gardell, Understreckare SvD 13 augusti 2009

Risk has been pushed back to individuals, through 401(k) plans, personal pensions and the like,  while those public bodies and big corporations still guaranteeing an income to their members face large and mounting deficits.  And yet many assume equity returns of 7 per cent. The Long View, FT 29 April 2016 The baby boomers, those born between 1946 and 1970, were the richest, and largest, generation that the world has ever seen . Unsurprisingly, they created a truly golden age for housing, auto sales and overall consumer demand.

"I do believe in general that there will be a day of reckoning unless we get fiscal stimulus," he said, pointing to the Federal Reserve's maintaining low interest rates, and potentially creating "tremendous bubbles." On the fiscal side Icahn argued that "you certainly could do more spending." "The Republican party that I used to be more sympathetic with — I'm right in the middle now, although as you know I'm for (GOP front-runner Donald) Trump — but what I would say is Congress is in this massive gridlock obsessed," he said, explaining that the Republican-controlled Congress is "obsessed with this deficit to a point that I think it's almost pathological." Icahn: Markets will have 'a day of reckoning', CNBC 28 April 2016

http://www.zerohedge.com/news/2016-04-29/world-getting-crazier-we-no-longer-notice

Time Bomb Ticking In The Global Bond Market $17 Trillion Of Governments Yield Less Than 1%,  Duration Risk Soaring Bloomberg Business 26 April 2016

Corporate America is swimming in cash.  There is no great news about this, and no great mystery about where it came from.  Seven years of historically low interest rates will prompt companies to borrow. A new development, however, is that investors are starting to ask in more detail what companies are doing with their cash.  And they are starting to revolt against signs of over-leverage. John Authers, FT 27 April 27, 2016

So long as at least one of the four rating agencies judges Portugal to be worthy, its government debt remains eligible to participate in the ECB's bond-buying program.  But if the country drops to sub-investment grade at all four, the ECB’s own rules forbid it from buying any more Portuguese government securities - purchases which have ballooned to almost 15 billion euros ($17 billion) in the program's one-year lifetime. Mark Gilbert, Bloomberg 25 April 2016

Hansson, Belfrage, Bildt och Magdalena Andersson Karin Pettersson Aftonbladet 2016-04-24

"I have long recognised my own contrariness (or is it bloody-mindedness) and hopefully put it to good use in my chosen profession. If you want the consensus bull-market cheerleading nonsense, readers know it is amply available elsewhere." I am neither monetarist nor Keynesian. I see merit and demerit in both sides of a very fractious argument.  But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB's policy of printing money and negative interest rates was working, I feel utterly depressed  Zerohedge 22 april 2016 Albert Edwards at IntCom

Sveriges riksbank sprutar in dopningsmedel i kreditmarknaden med en extremt expansiv penningpolitik för att få igång inflationen. Men det går inte utom på bostadsmarknaden där prisstegringarna ses som en samhällsfara. Finanspolitiken har i vårt land liksom i andra hållits fången av en doktrin som med anspråk på vetenskap säger att penningpolitik är det enda styrmedel som kan åstadkomma både stabilitet och tillväxt.  Doktrinens resultat kan vi nu se i en värld som skakas av kriser och utebliven tillväxt. Kjell-Olof Feldt, Dagens Industri 21 april 2016 - Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken. Det skrev jag på min blogg första gången  den 5 december 2009 . Keynes, Krugman, Secular Stagnation and The Death of the Rentiers Izabella Kaminska, FT Alphaville, 23 January 2014 Kjell-Olof Feldt hos IntCom

Lars Tobisson har gjort en värdefull insats genom att skriva en bok som kommer att bli standardverket om kampen om löntagarfonderna. Så här i efterhand kan det, i synnerhet för de som är födda på 70- och 80-talen, eller än senare, framstå som obegripligt att socialdemokraterna och LO i början och mitten på 1970-talet lade fram förslag som skulle ha lett till att Sverige blivit socialistiskt, nästan som Östtyskland, om ungdomarna vet vad det var. Rekordåren avlöstes runt 1968 av vänstervågen. Olof Palme besökte Fidels Castros Kuba 1975. Den I5 april 1975 intog Pol Pots styrkor, med blivande talmannen Birgitta Dahls gillande, Kambodjas huvudstad Pnom Penh och inledde masmordet känt från filmen Killing Field s. Den 30 april 1975 lämnade de sista amerikanska trupperna ambassadens tak med helikopter och Saigon intogs enligt myten av FNL eller VietCong som de själva också kallade sig. I själva verket intog Saigon av Nordvietnamesiska trupper med ryskbyggda stridsvagnar. ...

The business models of German financial institutions depend critically on the presence of positive nominal interest rates.  Rightly or wrongly, Wolfgang Schäuble regards the policies of the ECB as an attack on Germany’s economic model, which is heavily dependent on the viability of the country’s peculiar banking system German life insurers have to guarantee a minimum rate of return, which is now 1.25 per cent a year.  This is hard to do when the yield of the 10-year German government bond is only 0.13 per cent.  Wolfgang Münchau, FT 17 April 17  2016 

Clearly, the idea that large corporations precisely calculate the interest rate at which they are willing to undertake investment – and that they would be willing to undertake a large number of projects if only interest rates were lowered by another 25 basis points – is absurd. It should have been apparent that most central banks’ pre-crisis models – both the formal models and the mental models that guide policymakers’ thinking – were badly wrong.  None predicted the crisis; and in very few of these economies has a semblance of full employment been restored.  The ECB famously raised interest rates twice in 2011, just as the euro crisis was worsening and unemployment was increasing to double-digit levels, bringing deflation ever closer. Joseph E. Stiglitz, Project Syndicate 13 April 2016 Stiglitz at IntCom

We already know that in a world of declining cash flows, the primary source of funds to facilitated this behavior was debt issuance. In fact, as SocGen showed in a stunning chart last year, the only reason for the increase of net debt in the 21st century has been to fund buybacks. Zerohedge 15 April 2016

after nearly six years during which the fund’s reputation has taken a battering.  Although Athens and its eurozone partners agreed to a third bailout in July, the IMF has not yet signed up.  Germany has repeatedly warned it may no longer be able to support the deal if the IMF quits. FT 14 April 2016

Ben S Bernanke is  the one who falsely insisted that Great Depression 2.0 was just around the corner in September 2008.  Along with Goldman’s plenipotentiary at the US Treasury, Hank Paulson, it was Bernanke who stampeded the entirety of Washington into tossing out the window the whole rule book of sound money, fiscal rectitude and free market discipline. In fact, there was no extraordinary crisis .  The Lehman failure essentially triggered a self-contained leverage and liquidity bust in the canyons of Wall Street, and it would have burned out there had the Fed allowed money market interest rates to do their work.  That is, to rise sufficiently to force into liquidation the gambling houses like Lehman, Goldman and Morgan Stanley that had loaded their balance sheets with trillions of illiquid or long-duration assets and funded them with cheap overnight money. There would have been no significant s...

Fink called on political leaders to step in and provide fiscal reform to complement monetary policy. "We have become too dependent on central bankers" to boost the global economies, he said, stressing easy money policies were supposed to be a temporary healing.  "I don't call seven, eight years temporary. ... I don't see how that [still] has a positive impact." "Over 70 percent of our clients are retirement plans and insurance plans.   "Our clients are very worried how they're going to be meet their liabilities" because the yields are so low in the bond market. CNBC 14 April 2016

While the IMF wouldn’t be the IMF if it didn’t call for structural reforms, the theme that can be discerned across all the analysis is a worry over insufficient aggregate demand, which needs to be supported by all the policy tools in the toolbox  — monetary stimulus, “growth-friendly” fiscal policy and even those structural reforms, which the fund wants applied selectively... Martin Sandbu, FT Free Lunch 14 April 2016 Keynes at IntCom