of Japan is leading the way to new measures of stimulus insanity with a plan
to buy a wide variety of assets including real estate investment trusts
(REITs) and asset backed commercial paper (ABCP).
Please consider Factbox: BOJ to set up fund to buy
JGBs, corporate debt
of Japan on Tuesday decided to set up, as a temporary measure, a 5 trillion
yen ($59.9 billion) pool of funds to buy assets ranging from government bonds
to corporate bonds.
Following are key points about the new measure:
-- The programme will consist of a fund totaling 5
trillion yen to buy assets anew as well as the existing 30-trillion-yen
fixed-rate fund-supply tool that will hold designated assets as collateral.
-- The programme is a temporary measure aimed at
encouraging declines in long-term interest rates and risk premiums.
-- The fund is designed to cover Japanese government bonds, treasury bills,
commercial paper (CP), asset-backed commercial paper (ABCP), corporate bonds,
exchange-traded funds (ETFs) and Japanese real estate investment trusts
-- The BOJ will not apply its self-imposed ceiling on its outright JGB buying
to the JGBs to be purchased with the new fund.
-- The BOJ will aim to bring the balance of assets purchased using the new
fund to 5 trillion yen in one year, with about 3.5 trillion yen assigned for
JGBs and treasury bills and about one trillion yen for CP, ABCP and corporate
What About Paintings and
Why not paintings, equities, and shellfish? Given enough time, perhaps it
comes to that.
Meanwhile, I am pleased to report that the global recovery has gained so much
traction that numerous countries feel obliged to join the US/Japan sponsored
Global Competitive Debasement
Bloomberg reports BOJ May Have Acted First in Renewed Round of Action
unexpected decision by the Japanese central bank yesterday to drop its
interest rate to “virtually zero” and expand its balance sheet
follows the U.S. Federal Reserve’s move toward more unconventional
easing. Bank of England officials will consider further stimulus tomorrow,
while the central banks of Australia, Canada and New Zealand are among those
now holding fire on further interest-rate increases.
The renewed push for easier monetary policy comes as the International
Monetary Fund warns growth in advanced economies is falling short of its
forecasts ahead of its annual meetings in Washington this week. The dilemma
for policy makers is that their actions may do little to revive growth and
end up roiling currency markets.
Bank of Japan Governor Masaaki Shirakawa may not be
alone for long in taking action and Daiwa Institute of Research argues
he’s now engaged in a “vicious spiral” of monetary easing
with the Fed as both compete to bolster their economies.
“The irony is that the Fed is creating all this liquidity with the hope
that it will revive the U.S. economy. It is doing nothing for the U.S.
economy and causing chaos for the rest of the world,” Joseph Stiglitz, a Nobel Prize-winning professor at New
York’s Columbia University, said today in New York.
The ECB will be forced to postpone tighter policy as European exports fade
and investors continue to fret about peripheral euro-area economies such as
Portugal and Ireland, said Silvio Peruzzo, an economist at Royal Bank of Scotland Group
Inc. in London.
“The ECB’s exit strategy is fully on, but the business cycle will
turn against them,” said Peruzzo. “The
communication will then be adjusted to consider downside risks greater than
what they have anticipated.”
The ECB last week stepped up its government bond purchases as the cost of
insuring against default on Portuguese government debt surged to a record and
Irish bond spreads soared to euro- era highs.
Another risk is that the use of unconventional monetary policy is viewed as
an effort to weaken currencies to boost exports, rising competitive
devaluations and protectionist responses, said Eric Chaney, chief economist
at AXA Group in Paris. Japan, Switzerland and Brazil are among the countries
that have already intervened in markets to restrain their exchange rates.
“This is close to a currency war,” said Chaney, a former official
at the French France Ministry. “It’s not through exchange-rate
manipulation, but through monetary policies.”
This is not "close to a currency war" this IS a currency war.
While I have had numerous differences of opinion with Joseph Stiglitz, he is absolutely correct when he says “The
irony is that the Fed is creating all this liquidity with the hope that it
will revive the U.S. economy. It is doing nothing for the U.S. economy and
causing chaos for the rest of the world.”
Moreover what Stiglitz says about Bernanke and the
Fed, applies equally to the Bank of England, the Bank of Japan, and the
central banks of Canada and Australia as well.
Message of Gold
The competitive currency debasement can be seen in the price of gold and
None of these central bank measures are doing a damn thing for the real
economy (in the US or anywhere else), but it sure has ignited a fire in gold
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Global Economic Trend Analysis
Thoughts on the great
inflation/deflation/stagflation debate as well as discussions on gold,
silver, currencies, interest rates, and policy decisions that affect the