Printing money: Quantitative Easing, Lethal Economic Heroin

[Whitehall_Bin_Men]

Announcement that ECB will print money. QE. Comes on same day as Nato announce their own spearhead army outwith democratic control. Fascinating!

ECB’s stimulus surprise: Reactions around Europe
Katy Barnato | @KatyBarnato
Friday, 5 Sep 2014 | 9:35 AM ET
http://www.cnbc.com/id/101975071

The ECB's triple-interest rate cut and bond-buying announcement surprised investors on Thursday—and were still sparking debate a day later.

ECB President Mario Draghi said the council, which includes the central bank chiefs of each euro zone country, was "un-unanimous" in its decision to cut key rates to record lows and purchase covered bonds and asset-backed securities—a private-sector version of the quantitative easing practiced by the U.S. Federal Reserve.

He told journalists at his regular press conference on Thursday that a "comfortable majority" of members were in agreement, but that some felt the moves were unnecessary or inappropriate, while others had pushed for still more "unconventional" stimulus measures.

ECB-watchers were left in the dark as to which members voted against the measures. However, speculation was rife, as some countries' central bankers have previously come out as for or against further easing measures. One vocal critic is German Bundesbank President Jens Weidmann.

With that in mind, CNBC takes a look at reactions from around Europe—and further afield.

Germany

German economists, politicians and bankers have previously expressed skepticism about asset-buying by the ECB, mainly because they see it as a means of bolstering profligate southern European economies at the cost of frugal Germany.

Unsurprisingly therefore, Thursday's announcement was met with concern.

German business daily Handelsblatt headlined on Friday with "Draghi out of control", while DW ran an opinion piece on its website entitled "Draghi plays risky game".

[Whitehall_Bin_Men]

$12 trillion of QE and the lowest rates in 5,000 years ... for this?
Jeff Cox | @JeffCoxCNBCcom Mon, 13 June 2016
https://www.cnbc.com/2016/06/13/12-trillion-of-qe-and-the-lowest-rates -in-5000-years-for-this.html

The numbers are daunting if not shocking: $12.3 trillion of money printing, nearly $10 trillion in negative-yielding global bonds, 654 interest rate cuts since Lehman Brothers collapsed in 2008.
Those actions have resulted in global growth in advanced economies that likely won't eclipse 2 percent this year, inflation levels that remain well below targets and a burgeoning global debt problem that remains unresolved, withstood only through the lowest interest rates the world has seen in 5,000 years.
Put together, it all amounts to the "astonishing history investors are living through today," said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch who compiled the aforementioned statistics.
It's a history of anemic economic growth during the second-longest bull market for stocks. While banks have aggressively pushed quantitative easing along with zero and negative interest rate policies, the results have been uneven.
"The cocktail of QE, ZIRP and NIRP has been a potent one for Wall Street and the price of financial assets in the past eight years," Hartnett said in a report for clients, later adding, "And yet the bull market has waned in the past 18 months, there has been no 'normalization' of growth, rates and asset allocation, no 'Great Rotation,' and bonds and stocks have been trapped in a Twilight Zone of volatile trading."
That has come amid little growth despite all the accommodation.
The World Bank recently slashed its expectations for gross domestic product, cutting its 2016 global estimate to 2.4 percent from 2.9 percent, from 2.2 percent to 1.7 percent for advanced economies and from 2.7 percent all the way down to 1.9 percent for the United States. Growth in Japan, despite trillions of QE, is projected at just 0.5 percent, and the euro area, which also has been actively easing, is put at 1.6 percent.
Limited growth

GDP (%)
2016
2017
2018
World 1.7 1.9 1.9
U.S. 1.9 2.2 2.1
Euro 1.6 1.6 1.5
Japan 0.5 0.5 0.7
Emerging 3.5 4.4 4.7
Source: World Bank
Declining growth expectations have put the U.S. Federal Reserve in a precarious position.
Central bank officials want to return U.S. rates to a normal level after going more than nine years without a hike and more than seven years of keeping the rate anchored near zero, before hiking in December 2015. After a weak jobs report for May and fears that a British exit from the European Union could spark global and market turmoil, the Fed is unlikely to raise rates at its meeting later this week.
History, though, may wonder at all the fuss. With central bank policies ineffective at driving growth — the Fed's own economists have acknowledged as much — there's reason to wonder why the Fed didn't end the emergency measures sooner. The U.S. central bank has been responsible for about $3.7 trillion of the global QE post-Lehman Brothers, taking its balance sheet to $4.5 trillion.
"One of the things that will get a lot of attention is they had the opportunity at various times to start the normalization, and how different the outcome might have been," said Jim Paulsen, chief market strategist at Wells Capital Management. "There's a good argument that could be made that there's more damage being done to confidence than there is positive to fundamentals by maintaining the stance."
Hartnett attributed the market volatility to policy mistakes, including a potential rate hike or two this year from the Fed and "quantitative failure" from central banks in Japan and Europe; a profits recession that has seen five consecutive quarters of negative growth, including a drop of 4.9 percent in the second quarter; and valuation issues.
The "rotation" of investor cash from bonds to stocks — forecast by Bank of America Merrill Lynch and others — has not materialized, as investors remain wary of risk assets despite outsized returns over the past seven years. Equity funds, in fact, have seen more than $106 billion in outflows this year, compared with $75.8 billion that has come into bond funds.
Debt has exploded as well, with $9.9 trillion in negative-yield bonds representing a "supernova" ready to "explode," in the words of bond guru Bill Gross at Janus Capital.
Investors expect the Fed and other central banks to hold fast to accommodative policies, despite their waning effectiveness.
The Federal Open Market Committee meets Tuesday and Wednesday with the market expecting just a 2 percent chance of a hike. No month until December has better than a 50 percent chance, according to the CME's FedWatch tracker.
Paulsen thinks the Fed needs to move ahead with normalization despite some recent hiccups, as it would send a positive message that the FOMC believes the economy has stabilized enough to withstand some modest tightening.
"We've never tried to treat confidence, and I don't know that we shouldn't at least give it a stab," he said.
Correction: Lehman Brothers collapsed in 2008. An earlier version misstated the year.

Jeff Cox
Finance Editor

[Whitehall_Bin_Men]

£100bn created out of nowhere annually to prop up dead UK economy:
2017 UK QE money printing figures last year were £80bn to banks & £20bn to big business

Bank of England pumps £5bn into firms and £20bn into banks to keep interest rates down
https://www.telegraph.co.uk/business/2017/01/30/bank-england-pumps-5bn -firms-20bn-banks-keep-interest-rates/

Mark Carney is expected to upgrade the Bank of England's inflation forecasts this week, which reduces the chance of more QE
Mark Carney is expected to upgrade the Bank of England's inflation forecasts this week, which reduces the chance of more QE CREDIT: STEFAN WERMUTH/PA WIRE

Tim Wallace
30 JANUARY 2017 • 3:52PM
Banks and businesses have taken full advantage of the Bank of England’s quantitative easing scheme rolled out last year, borrowing far more than anticipated from the central bank.

The Bank of England bought £4.9bn of corporate bonds in just three months, when the scheme intended to buy £10bn over 18 months.

At the same time the Term Funding Scheme (TFS) which gives cheap funds to banks has injected £20.7bn into lenders. The aim of both policies, alongside a plan to buy £60bn of government bonds, was to keep interest rates down.

Economists welcomed the swift progress as an important boost to the economy, but as growth is currently relatively strong, they do not expect the Bank of England to extend the schemes when officials announce their next decision this Thursday.

Bond issuance spiked as more businesses borrowed money immediately after the Bank of England said it would buy £10bn of corporate debt CREDIT: UBS, BANK OF ENGLAND
“Corporate investment is a source of economic growth, and that borrowing costs came down can be seen as good thing because it boosted the probability of firms investing more,” said John Wraith, head of UK rates strategy at UBS.

The policy also helped mortgage interest rates fall further.

“If you think a robust housing market is part of the equation keeping consumers upbeat, then the Bank of England has to be thanked for that, they made sure the market was performing relatively well even in uncertain times,” said Mr Wraith.

The Bank of England anticipated a sharp slowdown in the economy but that did not materialise - something its chief economist Andy Haldane referred to as the Bank’s “Michael Fish moment”.

But economists argue that the QE programme has still helped cut borrowing costs and boost the economy, without doing much harm.

The MPC opted for more QE in August, before discovering the economy was continuing to grow unexpectedly quickly CREDIT: BANK OF ENGLAND
Overall around the rich world, however, interest rates are rising in bond markets, making it hard to see the overall effect of the policy.

At the same time inflation is picking up, in part because the pound has fallen, pushing up the cost of imports.

“The question really is if rates need to rise over the next year to cool inflation which now seems to be picking up faster than they had expected,” said Samuel Tombs, chief economist at Pantheon Macroeconomics.

“I think this week we will see slightly higher forecasts for inflation from the Bank of England, at least in the near term. It is even possible that one or two members of the Monetary Policy Committee may vote for a rate hike at this meeting. It is not my main expectation, but given the fact that growth and inflation have surprised to the upside over the past three months, then it cannot be ruled out.”