Jump to content
House Price Crash Forum
PeanutButter

How will central bankers cope when the next recession comes?

Recommended Posts

https://www.theguardian.com/business/2019/jan/07/central-bankers-recession-fiscal-policy

Quote

If you ask most central bankers around the world what their plan is for dealing with the next normal-size recession, you would be surprised how many (at least in advanced economies) say “fiscal policy”. Given the high odds of a recession over the next two years – about 40% in the US, for example – monetary policymakers who think fiscal policy alone will save the day are setting themselves up for a rude awakening.

Quote

If fiscal policy is not the main answer to the next recession, what is? Central bankers who are serious about preparing for future recessions should be looking hard at proposals for how to pay interest on money, both positive and negative, which is by far the most elegant solution. It is high time to sharpen the instruments in central banks’ toolkit. Over-reliance on countercyclical fiscal policy will not work any better in this century than in it did in the last.

 

Share this post


Link to post
Share on other sites

Negative interest rates, eh? Anyone with savings will just pull them from the banks. They don't even need to do it for long - the banks will be on their knees, regardless of money printing.

Share this post


Link to post
Share on other sites

Ah, how cute. People still thinking CBs are part of the solution.

Before ~2000ish, monetary policy was mainly in the political realm- bar the FED.

From 2000-2007 more monetary policy was shifted to the CB who, we were assured, would 'take the punch bowl away', not be beholden to short term political interest, do what was bets for the economy.

And its not as if the cuae of 08 was in some remote corner of the economy, far away from CBs nose - it was all fking bank debt, the area that CB are most responsible for overrseeing FFS,.

As another example of the 'science' of CB. in the 80s, when US inflation was out of control, Volker raised IRs to hammer it out. Most CB and economists disagreed with his policies or at least did not think it would work.

 

Share this post


Link to post
Share on other sites

I imagine their housing allowance will be smaller and they'll have to buy cheaper champagne.

Share this post


Link to post
Share on other sites
2 hours ago, stuckmojo said:

debt forgiveness. And a lot of anger from those not indebted (the minority who will have to suck it up). 

This one........ because there is no honest debt to forgive.......

When debt is discussed, there  needs to be specification as to what kind of debt (real vs thin air)..... This goes to the entire HPC GFC thing, where a few people (bankers) are allowed (encouraged?), by a few other people (government), to create thin air credit.

Edited by cnick

Share this post


Link to post
Share on other sites

They will cope with debt forgiveness via massive money printing reducing the value of the debt.

It wont be pretty, but no country is particularly pretty is it? which is a bit of a problem regarding punishing those with high debt, everyone is in the naughty corner. Which also means its going to be a battle for individual countries to compete in crashing their currencies fastest and hardest.

if your in a country which currency refuses to devalue despite massive money printing, then you really want to be part of the elite and not the average man, that gap is going to grow like you have never seen before.

Edited by jiltedjen

Share this post


Link to post
Share on other sites

They profited handsomely out of the last mess that they caused and I expect that they will profit again (unless the system collapses this time, of course).

Share this post


Link to post
Share on other sites
Just now, 24gray24 said:

Extraordinary that not one person so far thinks debts ought to be paid by the debtors. 

I'm coming around to the point of view that the ultimate responsibility for the debt rests on the shoulders of the bank who extended credit where none should have been extended - and in doing so, unbalanced the system.

 

You can always find someone who will take on debt with no thought as to how to repay it.  When you have the power to effectively create 'money' (bank credit is normally fungible with actual money) then its up to you to do so responsibly.

Share this post


Link to post
Share on other sites
8 minutes ago, 24gray24 said:

Extraordinary that not one person so far thinks debts ought to be paid by the debtors. 

Strictly speaking the question is "what will central bankers do?".  Not "what should happen?"

I think Mark Carney would do more QE - that is what he normally he does.

Share this post


Link to post
Share on other sites
3 minutes ago, iamnumerate said:

Strictly speaking the question is "what will central bankers do?".  Not "what should happen?"

I think Mark Carney would do more QE - that is what he normally he does.

And at some point productive elements of the economy will be priced out by speculation using cheap money.

Share this post


Link to post
Share on other sites
2 minutes ago, Si1 said:

And at some point productive elements of the economy will be priced out by speculation using cheap money.

I share your fear - I don't think the bank of England does though!

Share this post


Link to post
Share on other sites
5 minutes ago, iamnumerate said:

I share your fear - I don't think the bank of England does though!

Keynesian stimulus is to prevent a deficit of economic demand. There is also the possible deficit of economic supply to consider.

Share this post


Link to post
Share on other sites
1 hour ago, jiltedjen said:

They will cope with debt forgiveness via massive money printing reducing the value of the debt.

Most debts are serviced with wages so printing will only make debts easier to service if it causes wage inflation.

The printing in response to the GFC did not cause wage inflation, it was just used to bid up asset prices. Why would another round of printing cause wage inflation next time?

Edited by Dorkins

Share this post


Link to post
Share on other sites
1 hour ago, Dorkins said:

Most debts are serviced with wages so printing will only make debts easier to service if it causes wage inflation.

The printing in response to the GFC did not cause wage inflation, it was just used to bid up asset prices. Why would another round of printing cause wage inflation next time?

The Law of Accounting ensured that the original QE cash never left the banking system. Wage inflation is highly improbable under such circumstances and then only as a second order effect generated via economic recovery.

The Term Funding Scheme (2016-18) was more like a helicopter drop, only targeted at City institutions rather than the general public. It has substantially increased the quantity of money in circulation. Conversely, as the Scheme's four year lending term expires it's likely to have disinflationary impact. A good reason to expect it to be rolled over.

Share this post


Link to post
Share on other sites
2 hours ago, Si1 said:

And at some point productive elements of the economy will be priced out by speculation using cheap money.

I think that there's a lot of potential investment (either into new businesses or making existing business more productive) that has been passed over in favour of 'free' money and using it to buy back shares, or speculate on various asset classes.

Why do something difficult and complicated to make money when you can borrow for next to nothing and punt it into an asset that's going up, up, up  or buy back your own stock and see the price increase and you get a fat executive bonus?

 

Share this post


Link to post
Share on other sites
54 minutes ago, Sour Mash said:

I think that there's a lot of potential investment (either into new businesses or making existing business more productive) that has been passed over in favour of 'free' money and using it to buy back shares, or speculate on various asset classes.

Why do something difficult and complicated to make money when you can borrow for next to nothing and punt it into an asset that's going up, up, up  or buy back your own stock and see the price increase and you get a fat executive bonus?

 

That is the way of the world, the way they choose to do it, the easy way, the way that maximises gain for the few at the cost of the many .... there is another way but there is no will to go any other way.

 

;)

Edited by winkie

Share this post


Link to post
Share on other sites

Direct buying of stocks by ECB and Fed - just the same as Japan.

Debt jubilee of any kind will never happen because of the unprecedented power of the creditors in a world wherein the financial sector is bloated out of all proportion. The Greeks will confirm that for anyone in doubt. Sorry! No free car/house for anyone - those holding the debt will see society go to hell in a handbasket before there's any kind of debt forgiveness. Even the slightest murmurings of it from any politician will cause mass selloff by algos, I'd wager...

Share this post


Link to post
Share on other sites

There's going to be civil unrest if the "solution" is more printing money and doubling the wealth of the richest 1% again. Likewise if this "whoever you vote for means more low skilled immigration as we must grow GDP in absolute terms even if means making you poorer and fracturing your community" situation continues. You can see the first glimmers of it with the Gillets Jaune in France. 

I'm a cynic and I don't believe in coincidences. In this country over the past decade, we've seen squatting domestic property criminalized (housing shortage, exploitation level rent, foreign "empty flat" cash dumping was expected, not a surprise that cropped up - imagine the effect on the Hong Kong property fair stuff Osborne was whoring if a few thousand empty flats were squatted by deadlocked charity shop attired commies?) and an incremental crackdown on both legitimate & violent dissent, from jailing people who stole bottles of fanta in the 2011 riots to jailing anti-fracking protesters and flagrant misuse of the law to charge asylum deportation protesters with an offense carrying a life term recently. It's going to kick off if there's a serious recession in the West, the "toolkit" to mitigate it is looking pretty bare.

You'll know when the shit really hits the fan when the first European country has to declare some form of martial law or use the armed forces to maintain order. That may sound ridiculous, it just "doesn't happen in civilised countries" but beneath the veneer of control, we are only ever 5% of the population deciding to really kick off away from it happening. 

 

Edited by disenfranchised

Share this post


Link to post
Share on other sites
6 hours ago, 24gray24 said:

Extraordinary that not one person so far thinks debts ought to be paid by the debtors. 

.....because people are slowly coming to realise there are different kinds of debt.

Share this post


Link to post
Share on other sites
2 hours ago, disenfranchised said:

There's going to be civil unrest if the "solution" is more printing money and doubling the wealth of the richest 1% again. Likewise if this "whoever you vote for means more low skilled immigration as we must grow GDP in absolute terms even if means making you poorer and fracturing your community" situation continues. You can see the first glimmers of it with the Gillets Jaune in France. 

I'm a cynic and I don't believe in coincidences. In this country over the past decade, we've seen squatting domestic property criminalized (housing shortage, exploitation level rent, foreign "empty flat" cash dumping was expected, not a surprise that cropped up - imagine the effect on the Hong Kong property fair stuff Osborne was whoring if a few thousand empty flats were squatted by deadlocked charity shop attired commies?) and an incremental crackdown on both legitimate & violent dissent, from jailing people who stole bottles of fanta in the 2011 riots to jailing anti-fracking protesters and flagrant misuse of the law to charge asylum deportation protesters with an offense carrying a life term recently. It's going to kick off if there's a serious recession in the West, the "toolkit" to mitigate it is looking pretty bare.

You'll know when the shit really hits the fan when the first European country has to declare some form of martial law or use the armed forces to maintain order. That may sound ridiculous, it just "doesn't happen in civilised countries" but beneath the veneer of control, we are only ever 5% of the population deciding to really kick off away from it happening. 

 

But that’s what they have done, it’s exactly what they will keep doing, maybe going much harder with it as it’s diminishing returns so they will have to run the presses on full blast, white hot to stop house price falls, and that’s what they will do. 

maybe throw in some helicopter drops such as PPI, any free money will only go to those who will definitely spend it straight away, so the worst of the debt heads will get the helicopter money. 

more agressive helicopter drops are coming, anyone with credit card debt over 20k, anyone who ever had overdraft fees all are due huge chunks of freshly printed money.

fines for excessive bank savings in some indirect form. perhaps any amount over x amount will be converted to bank shares automatically. 

gold purchases taxed regardless if it’s soverigns or not. 

lots of pre-accepted credit cards put through everyone’s doors, with the debt bought by the government (I.e you and me) via forcing pensions to hold these new ‘super safe bond products’ 

a whole new range of ‘help’ for first time buyers, perhaps moving help to buy into second hand properties, and new ‘help to step’ mortgages. along with ‘help to rent’ 

total blanket ban on living in vans without ‘cultural passes’ given to the real traveling community. how dare you try and avoid rent or buying, special police vans fitted with heat cameras will be dragging those people out at 3am giving them £5,000 spot fines and crushing vans, with a 10 year prison sentence if they do it again.  

all seems some hellish nightmare but then again look what they did after 2008, never did anyone expect the government to go to such great lengths to protect HPI, too many people in power had too much exposure to the corruption and the bubble, just like the railway mania of the 1800’s, they bailed themselves out. All watched in complete horror by us on the HPC forum. 

our media are too clever and controlled to allow a yellow vest movement to take hold, revolution is dead even in France, all will eventually be tracked and arrested. CCTV everywhere. just takes a bit of time and the law will keep everyone in their place. our citizens are hell bent on screaming against they own interests and racist tendencies begging for brexit, when foreigners are not the issue, bankers are. 

any rage in this country will be lead and directed well away from the actual leavers of power, away from central and private banks and our corrupt government, and instead it will be split over multiple issues, fox hunting, chavs, foreigners, etc etc. people are getting more worked up about non-issues as they have a sense they are getting ******ed over, but don’t really ever look at root cause as they are too ******ing stupid. 

there is basically no way to rebel against this corrupt system than to change the way we store value and remove the ability of private and central banks to create money. there is new technology out there but again people are too stupid, lazy, ignorant or just plain luddites to give it a chance. 

Edited by jiltedjen

Share this post


Link to post
Share on other sites
43 minutes ago, cnick said:

.....because people are slowly coming to realise there are different kinds of debt.

Get real. For once in your life, get real.

Holding your hand out for a freebie only works if you're rich. Debt forgiveness only happens if you're a bank. 

For you, debt is slavery. 

Instead of begging your lord and masters to forgive your debts, which is never going to happen, stand up and be a man: insist the rich also pay their debts. No printing. No qe. No bail ins. 

If you keep begging your master for tuppence ha'penny  for yourself, you'll go on being handed the bill for the rich's debt jubilee for them. 

Share this post


Link to post
Share on other sites

I believe US have a way out as the softpower of USD(dollar) is huge and the countries will trust it whatever the case be. Also the interest rate have been increased few times now.

The CARNAGE of UK on other hand have left our country to ruins. Interest was not raised and no tools available. God save the country !

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.