Bank of Japan

Chart of the Year – China’s shadow banking collapse means deflation may be round the corner

Last year it was Bitcoin, in 2016 it was the near-doubling in US 10-year interest rates, and in 2015 was the oil price fall.  This year, once again, there is really only one candidate for ‘Chart of the Year’ – it has to be the collapse of China’s shadow banking bubble: It averaged around $20bn/month

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Monetary policy reaches sell-by date for managing the economy

Monetary policy used to be the main focus for running the economy.  If demand and inflation rose too quickly, then interest rates would be raised to cool things down.  When demand and inflation slowed, interest rates would be reduced to encourage “pent-up demand” to return. After the start of the Financial Crisis, central banks promised […]

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Central banks defy slowing global economy by destroying markets’ power of price discovery

Markets have one main function in life – price discovery.  If I want to buy, and you want to sell, the existence of a market allows us to discover the price at which the market will balance in terms of supply and demand. History, however, provides many examples of times when rulers decided they knew […]

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Central bankers create debt, not growth, by ignoring demographic reality

The world’s 4 main central bankers love being in the media spotlight.  After decades climbing the academic ladder, or earning millions with investment banks, they have the opportunity to rule the world’s economy – or so they think. But their background is rather strange preparation to take on this role – even if it was […]

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US 10-Year interest rates suggest Great Reckoning may be near

 ”History doesn’t repeat itself, but it often rhymes“, Mark Twain Bob Farrell of Merrill Lynch was rightly considered one of the leading Wall Street analysts in his day.  His 10 Rules are still an excellent guide for any investor.  Equally helpful is the simple checklist he developed, echoing Mark Twain’s insight, to help investors avoid […]

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Bank of England’s new stimulus policy creates bankruptcy risk for corporate pension funds

The Western BabyBoomers (born between 1946-70), have been one of the luckiest generations in history.  By and large, they have escaped the major wars that have plagued society down the ages.  They have also lived in a world where living standards and material wealth have made astonishing gains.  Equally priceless has been the rise in […]

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Oil market speculators profit as central banks hand out free cash

Oil markets are entering a very dangerous phase.  Already, many US energy companies have gone bankrupt, having believed that $100/bbl prices would justify their drilling costs.  Now the pain is moving downstream. The problem is the central banks.  Hedge funds have piled into the oil futures markets since January, betting that there would be lots […]

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If only the central banks could print babies

The Financial Times has kindly printed my letter below, arguing that central bank stimulus can’t restore growth to previous Super Cycle levels. Sir, John Plender’s excellent analysis “Central banks’ waning credibility is the real threat to confidence” (Insight, February 17) highlights the need for a new narrative to explain the economic slowdown of recent years. […]

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Great Unwinding sees oil fall 65%; US$ rise 22%; US 10-year rates rise 25%

The Great Unwinding of policymaker stimulus was the major issue in financial markets in 2015.  And it is set to have even greater impact in 2016 once Phase 3 begins.  The chart above highlights the astonishing changes that have taken place since the Unwinding began in mid-August 2014; Phase 1 has so far seen Brent […]

Great Unwinding sees oil fall 65%; US$ rise 22%; US 10-year rates rise 25% Read More

Commodity price fall pushes Japan back towards deflation

The combination of ageing populations and declining fertility rates means the world is following the Japanese model into deflation – despite all the efforts of policymakers to artificially induce price rises via their money-printing.  As discussed last November, under the title. ”Oil price fall set to push Japan back into deflation“, it was already clear then that […]

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Bank of Japan admits stimulus policy is modelled on Peter Pan

‘Peter Pan’ is one of the world’s most-loved children’s stories.But I hadn’t realised it had also become an economics textbook, at least in Japan.  Yet the Governor of the Bank of Japan (BoJ), Haruhiko Kuroda, described his stimulus policy last week as follows to an invited audience: “I trust that many of you are familiar with […]

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US dollar rises as investors worry low-cost money may disappear

Nobody knows how the Great Unwinding of central bank stimulus policies will develop.  The world has simply never been in this position before.  Thus the senior economics and business correspondent of the Financial Times, John Plender, began an article this week: “In a market where asset prices are comprehensively rigged by central bankers, rational investment […]

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You can’t print babies to create new demand

What would you have done 5 years ago, in 2009, if you had been given $16tn to restore global economic growth? Would you have boosted spending in areas such as education, health and infrastructure in the belief this would create a sustained boost to economic capability?  Would you have cut taxes in order to encourage entrepreneurs to develop new businesses and promote […]

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