Follow of the “along monetary policy experiments”

Consequences of the'grobten geldpolitischen experiments'

Share of us households with up to 35.000, 35-75.000 and more than 75.000 dollars. Image: zerohedge

During jp morgan the wound effect of the "quantitative easing" the usa with $ 11.5 trillion estimates, the financial markets set their hopes for japan and the ecb

After the "always monetary policy experiment" the story has now ended, his commutations have a few reason "quantitative easing" to look at the us federal reserve fed as a success. So the eurozone of the 2008 crisis is still not escaped and has just been confronted with minus growth, while the usa for the third quarter has reported just 3.5 percent gdp growth. Should the 4. In addition, as far as it has begun, this growth was also allowed to be achieved on an annual basis, which achieves the highest growth of the previous recovery achieved in 2004 in 2004.

Although there is no shortage of other reasons for the weakness of the eurozone, the herzte intervention of the fed was able to be a significant state of the us economy, in any case, to be a significantly better state of the us economy for the most common mabs. This also speaks that great britain reports similar growth rates and has set asholic programs as the usa.

The ecb has also significantly expanded its balance sheet from 2008, but at first with an expansion by around 500 billion euros to two trillion. Only in the course of the eurozon crisis, she has only raised its balance sheet total to three trillion euros, but in the meantime, but already returned, which does not even have a doubling of the balance sheet total (and thus the circumferential central bank money). The fed has, on the other hand, has extended its balance sheet since 2008 with three qe programs to now 4.5 trillion dollars and thus more than quadruple.

In addition, the balance sheet enhancements of the ecb have been carried out by secured lending, while the qe programs were characterized by the fact that the central bank has bought the papers in monthly set quantities directly on the market against central bank money, without agreeing as the ecb a fixed back purchase. This also seems to have a structural difference difference in addition to the purely quantitative difference, which was not sufficiently empirically empirically glued by financial science. So the fed buys exclusively us government bonds or. Bonds with unrestricted state guarantees and thus only financial assets at the lowest end of the risk spectrum. With 15. In october, the fed held us state debt with maturities of at least three years in the volume of 2.35 trillion dollars, which almost depends almost the half of the overall circulating emissions of around funf billarden dollar.

The financial markets are now particularly the price-sensitive "real money"-investors affected, for the insurance, foreign central banks or investment funds, without "leverage" work ("long-only"), us treasure ticks the "risk-free" part of your portfolios make up. By the apparently not price-sensitive demand of the fed, however, these investors are crowded from the market. They are forced if they do not want to exercise the fed, exhibiting a level in the risk hierarchy?. There, however, they turned out the previous builders, which attracts trials of the fed throughout the risk spectrum and increases prices until the most risky financial titles. While the fed admits to be directly responsible for absurd prices, which are currently paid on wall street for stocks and low-class corporate and real estate bonds, however, the "effects" be taken who had hoped for the fed, and that the owners consume this wealthy values consume part of this increase.

In the eurozone such an effect seems to be largely failed. Although the ecb has also massively expanded its balance sheet, but it has made this so that they offered the business banks to low fixed interest rates unlimited loans, which could ultimately decide on the banks of the ecb balance expansion. However, they had to highlight the ecb for loans, but the ecb ames all the papers, which at least the lowest investment grade rating (z.B. Bbb from standardpoors), which can thus be up to four rating levels under the qualities that the fed had accepted with their qe programs. After the banks here, however, will preferably deliver papers with the lowest quality quality, the bond requirement is distributed over a wide risk spectrum, which was allowed to have allowed that a broad increase in the surviving prices in europe was at least noticeable.

Thus, the effect of the ecb balance expansion was allowed to "normal" effect of the open market policy (in which the central bank set the central bank money set by the purchase and sale of securities). In the process, a rising money offer simply lowers the price for money, which the banks are paying with each other. They exceed the prescribed minimum reserve "excess" reserves led against the lack of creditworthy or. However, as well as in the united states, creditworthy borrowers, as well as in the us, was not used by the banks with preference for carry-trades. Because the business banks are kept the coupons of the bonds that they submit to the ecb, they can be financed by these bonds directly from the ecb and the interest rate difference thread, which is not as in the us for price increases over the entire risk spectrum.

The strongest affected were apparently the government papers of the weaker eurozone states and the first-class private companies, but the latter can hardly want to invest and the crisis states can also show hard-effect effects in view of the budget tests divided by the eu. In addition, in view of the relatively small stock in equities and bonds of the eurozone households, the expected wealth effects were allowed to hold in close limits anyway in narrow limits, which is now first.

In the us, on the other hand, in the usa, the surveillance increases were tremendous and thus the wealth effect, whereby the us coarse bank jp morgan has just submitted a treasure that was transferred from zerohedge. Accordingly, 32 percent or. Nine trillion dollars of boring capitalization of us guide index sp 500 has been drawn up by the qe programs, while us home prices have been increased by ten percent and prices of commercial real estate by 20 percent, which means a further 2.5 trillion dollars on additional assessments. This together 11.5 trillion dollars at additional market value corresponds to around two-thirds of us gdp, around which the us wealth owners have become richer on the paper with the help of the fed. In the meantime, this wealth effect also carries out on the income at the top end, with the proportion of us burger with annual income of at least 75.000 dollar, which was severely sealed from 2008, has been rising again since 2011, while the share of households with less than 35.000 dollars only since 2013.

After the surprising announcement of the bank of japan of other massive bond buy the us guide index sin the meantime, p 500 has driven up to 2040 numbers, the financial marketes seem to be convinced that boj and ecb are now jumping together for the fed in the breach and worried about the usual liquiditat. If this turns out to be a mistake, individual members of the federal reserve board have already already indicated to resume the breeding purchase, if necessary.

Remains only to flourish that the funds that the fed will then have to use the market to support the market, in the timing are only ever high – and with them the resulting fall risk.

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