Tag Archives: central banking

The incredible lost history of how "civil rights plus full employment equals freedom"

Source: The Intercept
by Jon Schwarz

"Ask yourself this: When was the last time you sat around with your family and friends talking about the Federal Reserve? By far the most likely answer is never, because you are normal human beings. But when was the last time you all hashed over one of you needing a job, or your health care coverage, or your asshole boss, or the chances you’ll get laid off? The answer to that is, you never stop talking about it. The combination of these two things is truly bizarre, because the Fed has more power than any institution over everything about work in America." (07/17/17)

https://theintercept.com/2017/07/17/the-incredible-lost-history-of-how-civil-rights-plus-full-employment-equals-freedom/

Can Japan end its easy money addiction?

Source: Ludwig von Mises Institute
by Brendan Brown

"The perception in currency markets is that Japan will not be embarking on monetary normalization this year or next, in contrast to Europe where ECB Chief Draghi has hinted that the train (to monetary normalization) will start next year, even though the journey promises to be very slow. The US train to normalization continues at a glacially slow pace including some periods of reverse movement. Moreover the monetary climate prior to the journey commencing is even more extreme in the case of Japan than in Europe or the US. It was possible to imagine that the shock election setback for the LDP could have caused Shinzo Abe to withdraw support from his money-printer in chief, Bank of Japan governor Haruhiko Kuroda (whose term ends in April 2008), thereby signaling an early end to negative interest rates and quantitative easing. But markets in their wisdom have concluded this is not to be." (07/17/17)

https://mises.org/library/can-japan-end-its-easy-money-addiction

Fed might start balance sheet drawdown in September, FOMC minutes hint

Source: Market Watch

"The Federal Reserve could trigger a long-awaited move to reduce its massive $4.5 trillion in debt holdings by September, a summary of the central bank’s last meeting suggest. The Fed said last month it would begin to whittle down its hoard of U.S. Treasury bonds and mortgage-backed securities some time this year. At a gathering of senior bank officials in mid-June, 'several preferred to announce the start of the process within a couple of months,' according to minutes of the June 13-14 Federal Open Market Committee meeting released Wednesday." (07/05/17)

http://www.marketwatch.com/story/fed-might-start-balance-sheet-drawdown-in-september-fomc-minutes-hint-2017-07-05

Why sound money does not need a central bank, only rule of law

Source: Mises Canada
by Patrick Barron

"The money that all nations use today is composed either of reserves created by a central bank and/or credit money created by banks via fractional reserve banking. In the first case, a central bank can create reserve money via open market operations, whereby the central bank buys an asset — any asset — with reserves that it creates out of thin air. These reserves land in a bank and allow the banking system to create credit money in multiples of the new reserves via the fractional reserve lending process. Both methods of money creation are fraudulent, if done by any entity other than a central bank, in the case of open market operations, or a bank member of that central bank system, in the case of fractional reserve lending. All nations have thrown the rule of law out the window for these monetary counterfeiters." (06/26/17)

https://www.mises.ca/why-sound-money-does-not-need-a-central-bank-only-the-rule-of-law/

The Fed rate hike and gold

Source: Cobden Centre
by Keith Weiner

"The big news this week comes from the Fed, which announced two things. One, it hiked the Fed Funds rate another 25 basis points. The target is now 1.00 to 1.25%, and there will be further increases this year. Two, the Fed plans to reduce its balance sheet, its portfolio of bonds. It won’t do this by actually selling, but by not reinvesting some of the principle repaid as the Treasury rolls over each bond at maturity. This is like reducing the workforce by a hiring freeze and attrition, rather than by layoffs. We are no Fed insiders, but if we were to take an educated guess, we would read the last part as a shuffle between the Fed and the banks. No one can afford rising long-term bond yields, as the banks hold plenty of them and this would be a capital loss. Also, if bond prices drop then all other asset prices would drop too. Banks would take another hit." (06/27/17)

http://www.cobdencentre.org/2017/06/the-fed-rate-hike-and-gold/

Fed raises rates — will other central banks follow?

Source: Ludwig von Mises Institute
by Ryan McMaken

"Last week, the Federal Reserve announced an increase in the Federal Funds rate to 1.25 percent. The last time the target rate reached so high was in September of 2008, when the rate was 2.0 percent. In October of that year, the target rate fell to 1.0 percent, and was moved down to 0.25 percent in December. It remained at 0.25 percent for the next 83 months. This week's rate increase was the third increase since December 2016, when the Fed increased the rate from 0.5 percent to 0.75 percent. Compared to the last seven years, this policy looks hawkish by comparison. On the other hand, compared to the 1990s — which were at the time seen as an era of low rates — current policy remains remarkably accommodative." (06/19/17)

https://mises.org/library/fed-raises-rates-%E2%80%94-will-other-central-banks-follow

Central banks are driving many to cryptocurrencies

Source: Ludwig von Mises Institute
by Demelza Hays

"Two years ago, Bitcoin was considered a fringe technology for libertarians and computer geeks. Now, Bitcoin and other cryptocurrencies, such as Ethereum, are gaining mainstream adoption. However, mainstream adoption has been propelled by financial speculation instead of by demand for a privately minted and deflationary medium of exchange. After the Fed’s rate hike this week, Bitcoin and alternative cryptocurrencies, such as Ethereum and Dash dropped in value instantly. Bitcoin, for example, dropped by approximately 16% in value while other coins dropped by approximately 25%. However, Bitcoin’s price recovered to the previous high within 18 hours. The reaction of the cryptomarket to the Federal Reserve announcement provides evidence that cryptocurrencies are seen as a safe-haven investment during times of significant fiat currency dilution." (06/16/17)

https://mises.org/blog/central-banks-are-driving-many-cryptocurrencies

Canadian interest rates set to rise?

Source: Mises Canada
by Caleb McMillan

"Is the Bank of Canada going raise its overnight benchmark rate? Since rising interest rates are decreed by the central bank, the real scarcity of capital in which major financial institutions can borrow and lend out overnight amongst themselves is unknown. Disconnected from any real savings, we expect the Bank of Canada to manually raise rates when the going gets good. This is flawed thinking. Clearly, the rag-tag team at the BoC have confused cause and effect once again. Through experience and logic, the idea that central banks can provide a free lunch is rebuffed by a hefty dose of reality. You need capital to have capitalism. Savings and production come before consumption. This is a priori true." (06/14/17)

https://www.mises.ca/canadian-interest-rates-set-to-rise/

Fed raises rates, unveils balance sheet cuts in sign of confidence

Source: Reuters

"The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market. In lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25 percent and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data. The U.S. central bank's rate-setting committee said the economy had continued to strengthen, job gains remained solid and indicated it viewed a recent softness in inflation as largely transitory." (06/14/17)

https://www.reuters.com/article/us-usa-fed-idUSKBN1952NA

Fed sets process to wind down $4.5 trillion balance sheet

Source: CNBC

"Federal Reserve officials appear to be in sync on how they plan to unravel the mammoth stimulus implemented during the financial crisis. The Fed is holding a $4.5 trillion portfolio, known as its 'balance sheet,' of mostly government debt it accumulated in the years after the crisis. Until now, the central bank has been taking the proceeds it receives from maturing debt and reinvesting them in more bonds. In recent days, officials have been indicating that the balance sheet will be unwound, likely starting later in the year, raising questions from investors about how the process will work and what impact it will have." (05/24/17)

http://www.cnbc.com/2017/05/24/fed-sets-process-to-unravel-4-point-5-trillion-balance-sheet.html