Here is a rough transcription of the presentation for people who are hard of hearing. Apologies for the lack of grammar, I am working to improve the automated transcriptions -
Halo what we have here is probably our future it’s not a mystic barn projection or prognosis it’s just looking that way and you have to really now come up with solid reasons to think that this isn’t going to be the future of the Western world this is obviously Japan you can see bottom left bank of Japan discount rate call money three month certificate of deposit and the ten-year government bonds 1990 they were at the top and decided that they had to bring them down so brought them down they did and by 99 they were on the bottom and have been bouncing along the bottom ever since and as I say there’s absolutely no reason to believe this same scenario won’t play out in the rest of the OECD world this is from shirk our the boss of the central bank of Japan his presentation to the London School of economic so which is a good effort of the presentation but because he had to read it it was a bit boring but they really have the experience of what the Western world is now experiencing they have it in Japan they invented all this stuff and you can see the red lines in all these three boxes are Japan’s other always the same but the blue is the United States yellow is Germany and green is the United Kingdom and basically so far that all following the Japan path and as I repeat again I can see no reason they won’t continue to follow the Japan half presentation barn is from the fed after their meeting a couple of days ago Wednesday target federal funds rate at the end of the year this is their glasnost this is there being open and honest about what the federal openmouthed committee members are thinking if we let’s go to the longer run first and of course they all agree that in the longer run everything will be back to normal and the federal target federal funds rate will be over for everyone believes that of course because if you didn’t believe that you’d have to come up with a dam good reason why there are plenty of reasons but you have to open your mouth and the committee to tell people so you say what in the end everything will go back to normal and things will be normal but the first arm three columns are 2012 1314 and where the various members each blue blob think the target fed funds rate is going to be we can imagine that the 90+ and Janet Daley are down in the bottom right in 2014 speakers the 90 said that that’s where the fed funds rate will be at the end of 2014 down where it is now a .25 other are plenty of other and committee members that think it should be up near to an a half and variously spaced out there and to get up to 2 1/2 obviously you need to step up their you have to start that early in 2013 but the important members think that 2014 everything will still be down .25 and the will be absolutely no explanation at how the longer run can ever get up to 4 again they’ll just put it there because it looks good but explain how it can get there is another matter and I don’t think we’ll be hearing any of those explanations this is from our live blog whose a nice chap but he gives by 90 a bit of a kicking in this blog posting the 19 does not understand savings twice in his press conference yesterday by 90 showed that he was out of touch with average Americans he argued that average people could keep up with a 2% increase in the price level inflation by investing in stocks and presumably short-term bonds speaking to the man Hank however blog says sorry Ben but you got Skype come down from the up and educated ivory tower and wallow in the mud with their rest of us there are three problems with what you said it’s hard to earn 2% after tax consistently when the fed funds rate is zero only the top 20% of wealthy have enough assets to keep themselves afloat using the asset markets most people would like to do something to protect themselves from inflation inflation but lack the means to do so an average people do not invest they say that financial intermediaries like banks savings and loans in life insurers fed policy fills rates for savers they will not become investors because they lack the knowledge to do so I am and if I am not into that is normally a very placid chap but term that was harsh for how this Bloomberg bank of America Citigroup among the banks facing margin pressures from friend fed is rate stance bank of America and Citigroup are among the lenders that may find it more difficult to boost profits and capital after the federal reserve pledged to keep its benchmark interest rates low until at least late 2014 this hurts the banks I don’t think those any question about that said Ralph Cole the senior vice president of research at Ferguson which manages lots of money their cost of funds stays low but it makes it harder to earn a return and that the thing although the banks can get cheap money the actual swamps that they can get on top of that the vaguely little bit extra and the is just low as well and the banks are just hurting because they index scraping for each fraction of percentage arm that they can make on their money and I am will need an awful lot of help via the back door all the way through to the end of 2014 with the target fed funds rate down toward zero opinion in the financial times by Alan Greenspan meddle with the market at your peril which I am I kind of looked at and went should I read this article or not and that’s actually a good headline because this going to be an awful lot more of this meddling with the markets but use read it and he got out and Greenspan you don’t want to take it from him because he’s messed up so big but quite frankly he is right there is an awful lot of mega mega meddling going on and we can guess imagine no that the mega messes do not know what they doing the will be hidden ramifications that they just don’t understand won’t understand can’t understand and they will cause things that then they will have to deal with in the future and it will be a miracle if this mega meddling actually all goes right slight change of gear Iran threatens to act first on EU embargoed you EU is the European people are going to stop buying Iranian oil Iran has threatened to pre-empt a European embargo on its oil by halting its exports to the region immediately a move that could hit economic Lee week Southern European countries indeed it could because they have to replace that stock and they will struggle even to find people to give them the oil at the bottom it says officials in Madrid Athens and Rome have said they would use the delay they might not get a delay to use to ask other oil producers including Saudi Arabia Russia and Iraq for additional supplies with the money problems on the moment her Saudi Arabia Russia and Iraq might not be accepting credit from Madrid Athens and Rome the moment Iran was willing to take on even Greece but who is certainly going to sell Greek oil to Greece on credit know what they can have to pay cash and I wouldn’t be surprised if Madrid naff than Rome have to as well problems overall GDP in the Eurozone is this chart from the ECB itself and even see it reached its Chitty peak in 2008 had its drop-down and it’s not back up there again yet harmed four years later and it’s flattening off and could well turn down again and this is the major problem probably in the world the moment Felix Salmon writing this from Davos says that solve all the meetings he’s been to this was the most important wary got some really good crunchy information and this is from the body of the article obviously link to read the rest of it effectively the unlimited swap lines have solved most of the global liquidity problems and have prevented the otherwise very scary prospect that a liquidity run could become a self Scafell and fulfilling insolvency process but that of course doesn’t mean that the world’s economies are all solvent who do and so the question then arises if you want to attack solvency rather than liquidity is international cooperation i.e. giving the IMF a massive fiscal bazooka the best way to do so? And the answer there seems to be no and this is what he’s getting from the Davos big hitters the biggest solvency problems are the problems within the Eurozone and it is ultimately Europe’s job to get the necessary cash together if it wants to avert a series of fiscal crises it’s the Europe into Eurozone problem Europe is rich richer than most of all the rest of the world except United States so Europe being rich has to deal with its own problems Felix finishes with this paragraph certainly there seems to be no belief at all even among the well intentioned technocrats at Davos that co-ordinated international action will all should solve this particular crisis and the inevitable conclusion is that the crisis is not going to be averted it’s only going to get worse it’s a very scary prospect but one which it’s very important for global elites to come to terms with and that’s exactly what they doing in Davos this week there trying to get the European leaders to accept responsibility for their own problems but are seeing shock horror that they’re not grokking it the European and politicians are trying to run away from their problems and the rest the world are looking on aghast trying to drag them back and push their own problems down their own throats saying we’re not can attack tidy this up you got to tidy it up but nothing at the moment still nothing at all pathetic of what
Podcast: Play in new window | Download
