How come, assuming you mean international support to be the euro 200 odd Bn debt?
The Emergency is over
- Thread starter Duke of Marmalade
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How come, assuming you mean international support to be the euro 200 odd Bn debt?
Recovery or not, 10 year bond yields of less than 2% is just absolutely nuts!
http://www.irishtimes.com/business/...s-new-low-ahead-of-possible-upgrade-1.1898039
It will end in tears....
http://www.irishtimes.com/business/...s-new-low-ahead-of-possible-upgrade-1.1898039
It will end in tears....
If you are continuously selling more than you are buying, it is very hard to screw it up in the long term. This has been one of the basic arguments Swiss financial advisor have been using in recommended Irish bonds for the past several years.
It is also one of the reason why they believe an exit from the EU would see a new Irish Punt rise rather than fall...
Given the benchmark rate of around 0.97%, it is about right....
Ha ha. No it's not. So the credit profile of Ireland justifies a 1% premium on German bonds?? The current price reflects nothing except ECB offering cheap funding in the repo market so there is huge positive carry in buying Irish debt and then going knocking straight to the door of the ECB. The Euro sovereign debt markets have lost all sense of normality and that won't last forever. That's why it's funny to see the Government congratulating themselves on falling bond yields. Even Greek yields are at ridiculous levels. Government policy has very little to with it. The Irish banks still own the majority of Irish debt so this idea that foreigners are trampling over themselves to buy into the 'Irish story' is ridiculous.
Well believe what you will, but my experience tells me otherwise.
It's not a case of what I believe. Before the crisis, foreign investors hugely outnumbered domestic holders of Irish debt. Now it's about 50:50 and guess who the is probably one of if not the largest foreign investors? Yep, the ECB. We are now borrowing at all time low levels. We couldn't even borrow at this level when we were running multi billion euro surpluses and had a debt to GDP ratio of about 25%. I know fund managers who bought when yields were multiples of what they are now. I don't know any fund managers who want 10 year bonds yielding 1.97%. I do know banks who want them purely for liquidity though.
Brendan Burgess
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Hi Duke
Your forecast was spot on.Here is McWilliams' latest piece in the Sunday Business Post:
Start the presses, Mr Draghi
Sometimes, when I hear the European elite say there is no alternative to austerity, I am reminded of those moustachioed generals[in the first World War] and the appalling human consequences of their inability to see that neither tactics nor strategy were working.
Today, the European economy is shuddering to a standstill. Both Germany and Italy contracted in the last three months. Meanwhile, France has stagnated for the second consecutive month.
Duke of Marmalade
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Boss, I read the article. Why do I waste time on this nutter?
But what is really familiar about the above quote is David's obsessive self belief in his unique genius - his capacity for thinking outside the box, of coming up with solutions which are radical, which are beyond the imagination of mere mortals. This is exactly how he urged us to leave the euro in 2009. I remember the article, pity I can't trace it, but I recall him implying that it takes a true genius to think outside the box, to contemplate the unimaginable, like Einstein. David fitted that very description (in his own lunchtime that is).
Whilst I am in the mood for saying nice things about David let me remind AAM readers that he fiercely criticised the ECB's LTRO programme - denounced it as printing money no less. I remember a quite humorous YouTube clip he produced which majored on displaying a number with countless zeros. And yet here is telling Super Mario not only to start printing but start handing out the stuff at street corners.
The radicalism he refers to is his suggestion that the central banks should simply give people money rather than supply it to the banks. His argument goes that if you dole out money to the plebs then they will spend it and the economy will grow. And when inflation returns the central banks simply take the money back. It's this last bit that puzzles me. I know that is the way "conventional" QE is supposed to work - if it becomes inflationary mop up the liquidity by reversing the asset purchases. But reversing the doling out of free money to the punters, how does that work? It's not the first "radical" suggestion by David, he had similar arguments for letting everybody off their mortgages, sure that would encourage a spending spree, the economy would grow and we would live happily ever after.
But what is really familiar about the above quote is David's obsessive self belief in his unique genius - his capacity for thinking outside the box, of coming up with solutions which are radical, which are beyond the imagination of mere mortals. This is exactly how he urged us to leave the euro in 2009. I remember the article, pity I can't trace it, but I recall him implying that it takes a true genius to think outside the box, to contemplate the unimaginable, like Einstein. David fitted that very description (in his own lunchtime that is).
Whilst I am in the mood for saying nice things about David let me remind AAM readers that he fiercely criticised the ECB's LTRO programme - denounced it as printing money no less. I remember a quite humorous YouTube clip he produced which majored on displaying a number with countless zeros. And yet here is telling Super Mario not only to start printing but start handing out the stuff at street corners.
Duke of Marmalade
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Here is that YouTube clip
[broken link removed]
[broken link removed]
Just what happened to Einstein, though our own erstwhile hero is still waiting to be hailed as the Messiah.
Brendan Burgess
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Hi Duke
That's a great video. The illustrations were brilliant. I only vaguely understand QE, and like, you I don't know how it gets reversed. He seems to be advocating something now, while strongly opposing its near equivalent a few years ago.
Brendan
That's a great video. The illustrations were brilliant. I only vaguely understand QE, and like, you I don't know how it gets reversed. He seems to be advocating something now, while strongly opposing its near equivalent a few years ago.
Brendan
Here is the article from his website if you can't read it on the SBP
[broken link removed]
I think David spends so much time looking for smart analogies like WW1 gernerals that he forgets about what his area of expertise is supposed to be. The idea of QE isn't radical. Bypassing banks to ensure the money flows into the real economy isn't radical. Coming up with a workable alternative would have been radical.
[broken link removed]
I think David spends so much time looking for smart analogies like WW1 gernerals that he forgets about what his area of expertise is supposed to be. The idea of QE isn't radical. Bypassing banks to ensure the money flows into the real economy isn't radical. Coming up with a workable alternative would have been radical.
Gerry Canning
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This pleb is of the following un-professional opinion;
In spite of, or is it because of ,we appear to be muddling along , the sticks in the dyke are holding and just maybe this flood is receding !
Mr Mc Willam is a very good self publicist.
He reminds me of the comment by a Union General on a Condeferate General.
{He is a very good General , he would volunteer his men for anything}
In spite of, or is it because of ,we appear to be muddling along , the sticks in the dyke are holding and just maybe this flood is receding !
Mr Mc Willam is a very good self publicist.
He reminds me of the comment by a Union General on a Condeferate General.
{He is a very good General , he would volunteer his men for anything}
It's easy to explain how conventional QE gets reversed.
With QE, the CB buys lots of financial assets.
They could buy shares, but they tend to buy bonds.
They need to buy a lot, so they need to buy in a large, deep, liquid market.
Typically, then, they buy Govt bonds, as there is a very large market for these assets.
Sometimes, they buy high-grade corporate bonds, or bank bonds, or mortgage-backed bonds.
In the US, the Fed bought lots of Treasury bonds, but also Mortgage Backed Securities MBS issued by wholesale banks.
To reverse QE, simple sell the bonds back into the market.
Duke of Marmalade
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Protocol
That is my understanding of "conventional" QE. David is maybe not quite arguing that the ECB should give the money away but he certainly is advocating doling it out directly to the public as interest free loans without being subject to normal commercial banking underwriting.
This is pure crackpot - and yet the SBP gives it an airing. David has become typecast. He has to come up with ideas outside the box - that's what his fans have come to expect.
Sometimes I think David actually believes in his schemes, that he might believe in the axiom "it is outside the box ergo it is brilliant".
But I am still prepared to give him the benefit. He is more likely a shrewd cookie simply milking his audience and gullible editors with what he knows to be pure idiocy. The fact that he can a little while back denounce the printing of money and now promotes the printing and giving it away is a rather breath-taking proof that he is simply a cynical showman.
That is my understanding of "conventional" QE. David is maybe not quite arguing that the ECB should give the money away but he certainly is advocating doling it out directly to the public as interest free loans without being subject to normal commercial banking underwriting.
This is pure crackpot - and yet the SBP gives it an airing. David has become typecast. He has to come up with ideas outside the box - that's what his fans have come to expect.
Sometimes I think David actually believes in his schemes, that he might believe in the axiom "it is outside the box ergo it is brilliant".
But I am still prepared to give him the benefit. He is more likely a shrewd cookie simply milking his audience and gullible editors with what he knows to be pure idiocy. The fact that he can a little while back denounce the printing of money and now promotes the printing and giving it away is a rather breath-taking proof that he is simply a cynical showman.
Brendan Burgess
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Hi Protocol
Is it that simple? If the Central Banks had bought a few hundred million of bonds, then that would be simple. But can they simply sell trillions back into the market?
Would that not create huge negative outcomes?
Well yes, it is as simple as either selling the bonds back into the secondary market, or holding them to maturity when the issuer will repay the CB.
But you are correct, the effects of massive sales on the market is a big issue.
Even the mere mention that the Fed might slow (not stop) its purchases of bonds has an effect on the market.
So yes, when QE in the UK and USA is ended, and if large amounts of bonds begin to be sold back into the markets, that could cause large effects on bond prices/yields, involving massive capital losses.
Now, the CB may decide to either simply hold the bonds until maturity to avoid such instability.
Or they may gradually sell these assets in a careful, controlled fashion, to help avoid instability.
But you are correct, the effects of massive sales on the market is a big issue.
Even the mere mention that the Fed might slow (not stop) its purchases of bonds has an effect on the market.
So yes, when QE in the UK and USA is ended, and if large amounts of bonds begin to be sold back into the markets, that could cause large effects on bond prices/yields, involving massive capital losses.
Now, the CB may decide to either simply hold the bonds until maturity to avoid such instability.
Or they may gradually sell these assets in a careful, controlled fashion, to help avoid instability.
http://www.voxeu.org/article/unwinding-quantitative-easing
A discussion of the effects of unwinding QE.
A discussion of the effects of unwinding QE.
Duke of Marmalade
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Stunning quarterly national accounts figures confirming that we have recovered all the GDP lost during the crisis. Will Gene Kerrigan admit that his simplistic leftie Keynesian rants against austerity have been proved so quickly to be hogwash?
I note calls on irisheconomy for Morgan Kelly to admit his doom mongering was way off and to apologise for the damage he caused to Ireland's international reputation.
I note calls on irisheconomy for Morgan Kelly to admit his doom mongering was way off and to apologise for the damage he caused to Ireland's international reputation.
Gerry Canning
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There appears to be Trillions upon Trillions of nominal currency value sloshing around in the form of Bonds/Qe etc.
There appears to be more nominal money ie, in laymans terms currency, in the system than could ever be spent, or that could in laymans terms we could ever call value.
There appears to be a confluence of thinking that as long as we keep the nominal currency value chugging along , then no-one will break the shell of these Trillions and cause a serious problem by forcing real value onto this nominal currency.
On that basis , have we not done well to survive thus far?
I cannot get my head around trying to figure out where real value versus nominal value exists.
To me , all this Qe/Bond buying has the hallmarks of doing whatever it takes to ensure that we avoid killing the measure called GDP and that as long as we all survive without major shocks , it is as good as it gets.
Maybe this is more than a bookies ensuring the odds do not go out of sinc and cause trouble, but I readily admit I cannot understand it.
There appears to be more nominal money ie, in laymans terms currency, in the system than could ever be spent, or that could in laymans terms we could ever call value.
There appears to be a confluence of thinking that as long as we keep the nominal currency value chugging along , then no-one will break the shell of these Trillions and cause a serious problem by forcing real value onto this nominal currency.
On that basis , have we not done well to survive thus far?
I cannot get my head around trying to figure out where real value versus nominal value exists.
To me , all this Qe/Bond buying has the hallmarks of doing whatever it takes to ensure that we avoid killing the measure called GDP and that as long as we all survive without major shocks , it is as good as it gets.
Maybe this is more than a bookies ensuring the odds do not go out of sinc and cause trouble, but I readily admit I cannot understand it.