Tag Archives: central banking

The Satoshi Revolution, Chapter 4, part 2

Source: Bitcoin.com
by Wendy McElroy

“Cryptocurrencies bypass central banks by privatizing the issuance of money and its transfer across borders. The globe should erupt in applause at the return of financial control to the individuals who produce wealth. Finally, financial justice. But a global party over currency freedom would be inadequate because it would overlook another revolutionary aspect of crypto. Cryptocurrencies and the blockchain are a new paradigm of privacy that will replace the old one as surely as the new currency broke the death grip of central banks.” (01/14/18)


The GOP’s tax reform offers no relief from the inflation tax

Source: Ludwig von Mises Institute
by Brendan Brown

“The Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017 promises no relief from one big tax on income — the inflation tax. Quite the contrary, there are strong grounds to expect this burden to increase as new and unannounced methods of collection evolve further. In recent years, the Fed’s commitment to the two-percent inflation standard, buttressed by radical experimentation in interest rate manipulation, has created a famine of interest income from which Uncle Sam has been a main gainer. Just look at the dwindling interest bill on government debt. As the Federal deficit to GDP ratio now climbs to a new peacetime record for the US economy in a late boom phase of its business cycle, this partly hidden and widely underestimated form of inflation tax alongside its older forms loom large as potential expedients to tackle crumbling public finances.” (01/10/18)


Fed officials expect economic boost from tax cuts

Source: US News & World Report

“Federal Reserve policymakers largely agreed last month that the U.S. tax overhaul would likely benefit the economy, but they were split on whether the resulting growth would warrant a faster pace of rate hikes this year. Minutes of the Fed’s Dec. 12-13 meeting released Wednesday show that officials believed the tax cuts would drive consumer spending and increased business investment, though they expressed uncertainty over the magnitude of the boost. The minutes indicate disagreement among Fed officials over how many times the Fed should raise its benchmark interest rate in 2018.” (01/03/18)


China: Central bank official suggests decentralization, Detroit-style bankruptcies for local governments

Source: Yahoo! News

“China needs to let local governments take responsibility for their finances, including allowing bankruptcies, as part of an effort to defuse their debt risks, a central bank official wrote on Monday. Central government control of the scale of local government bonds should be eliminated, while responsibility to issue and repay bonds should be held by the city or county that will actually use the funds, Xu Zhong, head of the People’s Bank of China’s research bureau, wrote in a an editorial on the financial news website Yicai. … Xu also said that China should dismantle the hukou system of internal migration control, as free movement of people promoted equal access to public services and helped resolve imbalances in finances.” (12/25/17)


The Satoshi Revolution, chapter 3, part 4

Source: Bitcoin.com
by Wendy McElroy

“Central Bank-Issued Digital Currency (CBDC) is a national currency that issues from a central bank. It is the crypto counterpart to a physical currency, such as the U.S. dollar. It is also a bitter irony. A monetary wildcat (crypto) meant to undermine the world’s financial system (central banks) is being caged and tamed to serve the status quo. At least, the status quo is trying. Nations are actively exploring the development of CBDCs. Russia plans to develop the cryptoruble. Japan wants the J-coin. The Bank of Canada released a thirty-page paper arguing for its own CBDC. The Federal Reserve has finally admitted to considering a U.S. crypto. China, the United Kingdom, India … the list of interested nations scrolls on. CBDCs may seem to parallel free-market digital currencies, but they are actually anti-crypto; they are the antithesis of Bitcoin.” (12/16/17)


The Fed’s fantasy on neutral interest rates

Source: Ludwig von Mises Institute
by Frank Shostak

“In her testimony to the Congressional Economic Committee on November 29, 2017, the Fed Chair Janet Yellen said that the neutral rate appears to be quite low by historical standards. From this, she concluded that the federal funds rate would not have to increase much to reach a neutral stance. The neutral rate currently appears to be quite low by historical standards, implying that the federal funds rate would not have to rise much further to get to a neutral policy stance. If the neutral level rises somewhat over time, as most FOMC participants expect, additional gradual rate hikes would likely be appropriate over the next few years to sustain the economic expansion.” (12/11/17)


It’s more than just the absence of acceleration, it’s the synchronization where there should be none

Source: Cobden Centre
by Jeffrey P Snider

“According to the latest ECB figures, as of yesterday total ‘liquidity’ added to the European banking system for that central bank’s ongoing monetary ‘stimulus’ was just shy of €2 trillion. The outstanding balance in the core current account (reserves) held on behalf of the banking system was €1.296 trillion. In the deposit account, banks are holding €686 billion at -40 bps in ‘yield.’ To create all these euro-denominated numbers, the European Central Bank through its constituent National Central Banks (NCB) has purchased €2.21 trillion …. The numbers given above don’t appear to balance because of the way all this stuff is accounted for.” (12/06/17)


The Fed could be tightening more than it realizes

Source: Cobden Centre
by Benn Steil

“Ten years ago, before the collapse of Lehman Brothers rocked global financial markets, the Fed’s balance sheet stood at $925 billion — mostly U.S. Treasuries. After fifty-nine months of asset purchases to push down longer-term interest rates, it had ballooned to a peak of $4.5 trillion, including nearly $1.8 trillion in mortgage securities, in October 2014. In October of this year, the Fed at last began a slow slimming-down of the balance sheet, allowing $10 billion in maturing securities to roll off without reinvesting the proceeds. All else being equal, this represents a tightening of monetary policy, as it tends to push up longer-term (10-year) market interest rates.” (11/21/17)


Is there any way out of the ECB’s trap?

Source: Cobden Centre
by Daniel Lacalle

“The ECB faces the Devil’s Alternative that Frederick Forsyth mentioned in one of his books. All options are potentially riskly. Mario Draghi knows that maintaining the so-called stimuli involves more risks than benefits, but also knows that eliminating them could make the eurozone deck of cards collapse. Despite the massive injection of liquidity, he knows that he can not disguise political risks such as the secessionist coup in Catalonia. The Ibex reflects this, making it clear that the European Central Bank does not print prosperity, it only puts a floor to valuations. The ECB wants a weak euro. But it is a game of juggling to pretend a weak euro and at the same time a strong economy.” (11/15/17)


What Hayek tells us about the link between ultra-loose monetary policy and political instability

Source: Cobden Centre
by Professor Gunther Schnabl

“The European Central Bank will increase the overall volume of its bond purchase program to 2.550.000.000.000 euros by September 2018. The main refinancing rate will remain at zero. Mario Draghi has stressed that this policy shall continue until inflation picks up sustainably (which is unlikely to happen in the foreseeable future). The works of Friedrich August von Hayek (1931, 1944, 1976) help to explain why the tremendous monetary expansion is increasingly causing growing economic and political instability in Europe.” (11/08/17)