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Hsbc: Central Banks Are Running Low On Ammunition

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http://www.bloomberg.com/news/articles/2015-05-13/hsbc-central-banks-are-running-low-on-ammunition

"The world economy is like an ocean liner without lifeboats." That's the headline in HSBC Chief Economist Stephen King's latest note. What he's getting at is that with interest rates sitting at or near record lows in economies across the globe, central banks could be set for major struggles if the economy starts to sour.

If another recession hits, it could be a truly titanic struggle for policymakers. ... Remarkably enough, it’s six years since the last recession, suggesting the next one may not be too far away, yet there is a total absence of traditional policy ammunition.

In past recoveries, policymakers on both the fiscal and monetary side have been able to raise rates and "replenish their ammunition," as King puts it. This recovery has proved otherwise.

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King says this is a huge problem.

In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.
Meanwhile, budget deficits are still uncomfortably large and debt levels uncomfortably high: while the US fiscal position has improved, it remains structurally weak.

Although the Federal Reserve is the most discussed, it's not just the U.S. central bank that has embarked on this historical move. King notes that several other regions have similar narratives. The European Central Bank appears to be committed to quantitative easing until September 2016. The Bank of Japan is basically in the same boat. The Bank of England may not be increasing its balance, but it has yet to raise rates. Fiscal positions, meanwhile, are mostly poor, at least when compared with those pre-crisis.

I don't agree with that rates can't fall by 5 percentage points, they clearly can as they can go negative.

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Havent they f*cked off yet? Please get a move one......Panama would be just perfect.

Meanwhile, budget deficits are still uncomfortably large and debt levels uncomfortably high:

Yawn...same old drivel.

Edited by R K

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But there is no monetary easing effect below 0% (unless your actually going to pay people to borrow money).

That I think is the next logical step in our fiat system. Essentially let people borrow money and continue to bid up asset prices to keep the illusionary wealth. The banking system already has it's own unique accounting rules so it wouldn't be too hard to adjust them to this new paradigm and keep them solvent. Totally insane but the only option they have left if they won't allow the system to correct and the next recession comes..

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http://www.bloomberg.com/news/articles/2015-05-13/hsbc-central-banks-are-running-low-on-ammunition

I don't agree with that rates can't fall by 5 percentage points, they clearly can as they can go negative.

they don't NEED to fall by that much if the policy makers stop making policies....in fact better still, reverse some of the crackpot central-planning micromanagement we've had over the past 40 years.

it's THAT,which has caused the deflation in the first place,not interest rates.

too much tax, too much government,too much spending,and spending badly.

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If another recession hits, it could be a truly titanic struggle for policymakers

Interesting how the idea that recessions must be somehow managed by the state has become so deeply internalized in the banking sector that the notion of a free market in which such things are a normal part of the cycle now appears wildly eccentric- yet the guy who wrote this will still quite sincerely insist that his income is entirely a product of that alleged' free market' and as such cannot be questioned.

The bankers claim to oppose socialism at every turn but in reality hold the deeply socialist view that the Government owes them a living and should provide whatever resources it can to ensure that that living is maintained.

The above comment is not questioning the idea that the state should be propping up the economy and (therefore) the market- this is a given- the only issue of concern here is how much more wealth remains to be committed to this objective.

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Pretty much wonderpup. As you've implied in the past it's free markets in most labour, wages and fighting for stalled opportunity - and anything but for creditors and asset holders. The world economy is not like an ocean liner without lifeboats, it just needs to adjust to reality. The rentier economy is the problem, and it's about time it was left to sink and die without taking everything else with it.

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they don't NEED to fall by that much if the policy makers stop making policies....in fact better still, reverse some of the crackpot central-planning micromanagement we've had over the past 40 years.

it's THAT,which has caused the deflation in the first place,not interest rates.

too much tax, too much government,too much spending,and spending badly.

This.

Wonderpup doesn't quite grasp this because like our leaders he's a dyed in the wool statist, its hard for him to fathom life with less of it.

Once ordinary loans and mortgages are available at negative rates we will attain end-game at light-speed.

Edited by TwoWolves

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This.

Wonderpup doesn't quite grasp this because like our leaders he's a dyed in the wool statist, its hard for him to fathom life with less of it.

Once ordinary loans and mortgages are available at negative rates we will attain end-game at light-speed.

If you actually read what I wrote, instead of enacting a pavlovian response to the word 'Wonderpup' you will see that I was in fact arguing against the premise of the quoted article that the state should intervene- my point being that the Bankers have traveled so far down the road to socialism that they now see state intervention in the markets as a necessity- their only concern being that the state may lack the resources to deliver this intervention.

Recall that not so very long ago these same bankers were arguing the state should keep it's nose out of the market completely- this was, of course, before they started screaming for state bailouts and converted from free marketeers to the new cult of socialism for the rich.

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unless it's just pure theft. The greatest theft in the history of the world. Our money transferred to financiers

.

Edited by shindigger

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Stephen King Warns "The Second Great Depression Only Postponed, Not Avoided"

20150516_titanic.jpg

Reading like his name-sake's horror novels, HSBC's Chief Economist Stephen King unleashes a torrent of truthiness about the Titanic-like economic ocean liner that is headed for an iceberg except this fragile ship doesn’t have lifeboats.

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Well if the 'world economy is like an ocean liner without lifeboats' then the finance industry had better learn how to swim because I am sick of throwing them my lifebelts!

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I think he's just saying what we all know; record low interest rates, economies on life support fudged figures masking the true extent of unemployment, low tax take and another issue just around the corner. How they've kept it going this long surprises me, nothing else.

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Interesting how the idea that recessions must be somehow managed by the state has become so deeply internalized in the banking sector that the notion of a free market in which such things are a normal part of the cycle now appears wildly eccentric- yet the guy who wrote this will still quite sincerely insist that his income is entirely a product of that alleged' free market' and as such cannot be questioned.

The bankers claim to oppose socialism at every turn but in reality hold the deeply socialist view that the Government owes them a living and should provide whatever resources it can to ensure that that living is maintained.

The above comment is not questioning the idea that the state should be propping up the economy and (therefore) the market- this is a given- the only issue of concern here is how much more wealth remains to be committed to this objective.

Totally agree with this. Especially the 'free market' the bankers claim they operate in, when the monetary system was effectively nationalized back in 2008 with huge government bailouts. The 'state' needs to get out of the way!

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Here is where the real issue is, the worlds most powerful (for now...) Central Bank.

http://economictimes.indiatimes.com/news/international/business/us-federal-reserve-should-aim-to-overshoot-2-per-cent-inflation-target-charles-evans-says/articleshow/47325888.cms

What use is 2%+ inflation when real wages are static or falling?

Edited by Noginthenog

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Here is where the real issue is, the worlds most powerful (for now...) Central Bank.

What use is 2%+ inflation when real wages are static or falling?

They would love a steady 2% inflation, both in wages and spending/consumption.....but they themselves have created the deflation we see today both in low interest rates, creation of money and importing of cheap labour from overseas......they can't have their cake and eat it. ;)

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Evans warned that by not aggressively moving to boost inflation, the public may begin to assume the Fed is content to miss its own goals, undercutting the effectiveness of US monetary policy.

So- to clarify- should the Federal Reserve fail to inflate away the value of their money the US public might lose faith in their policy??? :lol::lol::lol:

How far down the rabbit hole of financial doublespeak do these people actually live?

Most real people would probably prefer their money to actually hold it's value over time- rather than having that value stolen to serve the needs of a corrupt and broken financial sector.

So when this guy talks about 'the public' he really means the small group of insiders to which he belongs- who are the only people that matter anyway I suppose.

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I think he's just saying what we all know; record low interest rates, economies on life support fudged figures masking the true extent of unemployment, low tax take and another issue just around the corner. How they've kept it going this long surprises me, nothing else.

That was my view as well, based on the original article http://www.scribd.com/doc/265541700/HSBC-Stephen-King-Recession

I'm surprised this thread didnt seem more enthusiastic about it.

I've now read the article several times to be sure. It's a sensible person looking at the big picture ,presenting a alarming condition in a calm way, it certainly spells out the trouble many economies are in.

I'm getting more convinced that demographics is the simple underlying cause. The most productive age groups are declining and that is not compatible with the view that "things should always be getting better". Financial games are being played it an attempt to generate growth which won't produce any genuine growth.

The usual parasites are picking off as much as possible but don't seem to have noticed that their host is getting old.

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That was my view as well, based on the original article http://www.scribd.com/doc/265541700/HSBC-Stephen-King-Recession

I'm surprised this thread didnt seem more enthusiastic about it.

I've now read the article several times to be sure. It's a sensible person looking at the big picture ,presenting a alarming condition in a calm way, it certainly spells out the trouble many economies are in.

I'm getting more convinced that demographics is the simple underlying cause. The most productive age groups are declining and that is not compatible with the view that "things should always be getting better". Financial games are being played it an attempt to generate growth which won't produce any genuine growth.

The usual parasites are picking off as much as possible but don't seem to have noticed that their host is getting old.

Hm, demographics. In the UK 2011 census those over 65 were 16.6% of the population, those under 25 were 30.7%.

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