1% Growth! Please to Obey Abenomics Rule!

[Wage Slave]

The Bank of Japan in a world first! Of course they know what they are doing. Negative interest rates! That'll learn the fuckers to go out and spend the money they don't have cos wages are so pisspoor.

http://money.cnn.com/2016/01/28/news/economy/bank-of-japan-negative-interest-rate/index.html

[FG Lurker]

This isn't a world first, the ECB has done this before.

[Wage Slave]

This isn't a world first, the ECB has done this before.

Really? When? They have talked about it, threatened it but haven't yet done it as far as I can see. It wasn't even really a theoretical possibility worth talking about until a few years ago.

[FG Lurker]

Really? When? They have talked about it, threatened it but haven't yet done it as far as I can see. It wasn't even really a theoretical possibility worth talking about until a few years ago.

http://www.bloombergview.com/quicktake/ ... rest-rates

Edit: The Swiss did it for some deposits in the early 70's as well:
http://snbchf.com/snb/2013-snb/reflecti ... itzerland/

It's obviously not a normal or desirable situation but it's not unique.

[Wage Slave]

Really? When? They have talked about it, threatened it but haven't yet done it as far as I can see. It wasn't even really a theoretical possibility worth talking about until a few years ago.

http://www.bloombergview.com/quicktake/ ... rest-rates

OK, I see. Thanks. The ECB put the bank re-financing rate below zero but the base rate (which is the one that affects us) stayed positive. I think the BoJ has actually taken the base rate below zero - And that is a first. Or perhaps not ...I'm not totally sure.

[Taro Toporific]

And the Yen drops like a turd in two-story outhouse...

yen-drops.png

no-money-abe.jpg

[FG Lurker]

OK, I see. Thanks. The ECB put the bank re-financing rate below zero but the base rate (which is the one that affects us) stayed positive. I think the BoJ has actually taken the base rate below zero - And that is a first. Or perhaps not ...I'm not totally sure.

The newly negative rate is for reserves held at the BOJ to encourage banks to lend rather than hold cash.

I think the "official" rate is the Overnight Call Rate which is the official overnight short term lending rate. That remains positive in Japan, at least for now.

[Wage Slave]

OK, I see. Thanks. The ECB put the bank re-financing rate below zero but the base rate (which is the one that affects us) stayed positive. I think the BoJ has actually taken the base rate below zero - And that is a first. Or perhaps not ...I'm not totally sure.

The newly negative rate is for reserves held at the BOJ to encourage banks to lend rather than hold cash.

I think the "official" rate is the Overnight Call Rate which is the official overnight short term lending rate. That remains positive in Japan, at least for now.

Aha. That does sound very similar to the ECB case then. So, for the second time ever in the world the BoJ sets a negative interest rate.

[FG Lurker]

Aha. That does sound very similar to the ECB case then. So, for the second time ever in the world the BoJ sets a negative interest rate.

Actually it seems a bunch of other banks in Europe did the same thing, and the Swiss did it in the 70s (for certain types of deposits only).

Also, the negative rate set by Japan seems to be only for central bank deposits that exceed current levels. In other words, they don't want banks continuing to pile more money into the JCB but they'll allow them to maintain what they have there now.

[Wage Slave]

Aha. That does sound very similar to the ECB case then. So, for the second time ever in the world the BoJ sets a negative interest rate.

Actually it seems a bunch of other banks in Europe did the same thing, and the Swiss did it in the 70s (for certain types of deposits only).

Also, the negative rate set by Japan seems to be only for central bank deposits that exceed current levels. In other words, they don't want banks continuing to pile more money into the JCB but they'll allow them to maintain what they have there now.

Bit of a non story then unless you happen to be a bank with excess funds on your hands that you want to park safely. As long as they don't start charging their customers a negative interest rate, then fine. We will see but I suppose if they proposed that the BoJ wouldn't be best pleased seeing as how the object of the exercise is to get some inflation going.

[Wage Slave]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

[inflames]

Banks would be absolutely batshit crazy to invest money in the stock market.

Might lend it out to each other for basically nothing as there's nowhere where you can attempt a carry trade worthwhile now.

[dimwit]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

[Wage Slave]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

[Russell]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

[Wage Slave]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

Not sure what you mean. Do you mean you strongly disagree with banks lending money to people and businesses? Or you strongly disagree with what they are doing now?

Anyway, was it lending to people and business that caused the crash or was it buying and trading of so called securitised debt with little idea who or what actually owed the money that underpinned those so called assets?

The Glass-Steagall act was about what proportion of a banks assets that have to be kept in ultra safe investments like government bonds or deposited with the central bank. I don't think anyone disagrees that that needed correcting. It's what the banks do with the rest of their money that is the question. And do we have a right to regulate that if we are the ones who have to bail them out if their schemes go wrong?

[Russell]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

Not sure what you mean. Do you mean you strongly disagree with banks lending money to people and businesses? Or you strongly disagree with what they are doing now?

Anyway, was it lending to people and business that caused the crash or was it buying and trading of so called securitised debt with little idea who or what actually owed the money that underpinned those so called assets?

The Glass-Steagall act was about what proportion of a banks assets that have to be kept in ultra safe investments like government bonds or deposited with the central bank. I don't think anyone disagrees that that needed correcting. It's what the banks do with the rest of their money that is the question. And do we have a right to regulate that if we are the ones who have to bail them out if their schemes go wrong?

I disagree with you that banks should invest their customers' money in the stock market.

[Wage Slave]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

Not sure what you mean. Do you mean you strongly disagree with banks lending money to people and businesses? Or you strongly disagree with what they are doing now?

Anyway, was it lending to people and business that caused the crash or was it buying and trading of so called securitised debt with little idea who or what actually owed the money that underpinned those so called assets?

The Glass-Steagall act was about what proportion of a banks assets that have to be kept in ultra safe investments like government bonds or deposited with the central bank. I don't think anyone disagrees that that needed correcting. It's what the banks do with the rest of their money that is the question. And do we have a right to regulate that if we are the ones who have to bail them out if their schemes go wrong?

I disagree with you that banks should invest their customers' money in the stock market.

Ah. I was being sarcastic. I agree with you completely. I was just laying out their thinking at present.

[Coligny]

well unless it's for tulips...

wankers....

[dimwit]

Er... no I meant literally lending money to gangsters, the problem being that gangsters make it a rule not to pay back loans, and it is difficult to enforce them to as all the muscle tends to be yakuza. This directly led to collaspe of several banks in the late 1990's.

During the Japanese asset price bubble of the late 1980s Japanese banks, including DKB, granted increasingly risky loans. What was worse, DKB financed not only risky companies but also Yakuza, crime organizations, in order to invest in capital resources much more easily than its competitors. Above all, loans to sōkaiya amounted to 30 billion JPY.

After the bubble's collapse, the bad loans were judged to be poor value for money. A raid by Tokyo prosecutors in 1997 impeaching of the loans to sōkaiya laid DKB open to public criticism. Kuniji Miyazaki (宮崎 邦次 Miyazaki Kuniji?, 1930 - 1997), former president and the then chairman of DKB, who faced severe pressure over a series of alleged misdeeds, committed suicide by hanging himself at his home.

https://en.wikipedia.org/wiki/Dai-Ichi_Kangyo_Bank

[Wage Slave]

Oh, I see. Didn't know about that. I thought the Yakuza were fairly businesslike when it came to banking and such.

[kurogane]

Well, businesslike if you consider their organized cockroachery a business model, which they certainly do. Much of it is hearsay but in the late Bubble era they were said to be showing up at the closest neighbourhood branches demanding fairly large loans on the obvious understanding there would be no pesky conditions like interest or repayment. I do wonder if they might have repaid them if the real estate investments they made hadn't caved in when everything went Plop. During that one brief crackdown in the early or mid-90s they started to clean up their act quite quickly to avoid petty Sopranos style dickishness being the cause of major legal calamity. And then the cops laid off them and they went back to being dicks.

[inflames]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

Glass-Steagall didn't cause the financial crisis at all. Basically the entire securitization of mortgages model was built around securitizing shit yet getting it rated AAA, which was sold to companies around the world. When people realized Lehman Brothers and AIG were basically bankrupt short-term lending markets basically froze up as people instantaneously realized that companies that were huge short-term borrowers and had been highly rated were worthless. Commercial banks (even those that had big investment banking operations) were basically unaffected by this. JP Morgan and Wells Fargo were basically unscathed and Bank of America were basically insolvent but not illiquid (Bank of America might not have been in trouble if it weren't for Merrill Lynch).

[Wage Slave]

Well the stock markets loved it anyway - for today at least. How lasting the impact will be remains to be seen. Give the banks more money so they will lend it and stimulate the economy or discourage the banks from sitting on excess money and lend it instead - What do they do? Put the money into the stock market of course!

Well, they could always lend it out to gangsters the way they used to.

I get the distinct impression that would do at the moment. But they just don't want to do it - The stock market and other trading offers so much better prospects without all the tiresome and dull stuff that lending demands. You might not be able to control the risks but at least they are clearly laid out and you can gain an advantage on other players via your mathematics graduates, your IT systems, your connections to the market, your access to inside chatter and all that good stuff. A lot of the routine stuff you have to do anyway for your customers' financial products, so effectively they pay for the infrastructure and you cream off the top. Why would anyone want to get involved with lending to people or businesses - except maybe house mortgages.

Have people with money to give you as your customers, not people who need money from you and promise to pay later.

That is one of the big problems that have repeatedly led to major financial crises: banks gambling with their customers' money.

It is the reason for the Glass–Steagall Act of 1933. Unfortunately, it was repealed under President Clinton at the end of the 1990's, and this is considered the major reason for the financial crisis of 2007-2008. So, now luminaries like Bernie Sanders and Elizabeth Warren want to reinstate this act. This is what the 2016 Democratic primaries are all about.

So, no, I strongly disagree with you.

Glass-Steagall didn't cause the financial crisis at all. Basically the entire securitization of mortgages model was built around securitizing shit yet getting it rated AAA, which was sold to companies around the world. When people realized Lehman Brothers and AIG were basically bankrupt short-term lending markets basically froze up as people instantaneously realized that companies that were huge short-term borrowers and had been highly rated were worthless. Commercial banks (even those that had big investment banking operations) were basically unaffected by this. JP Morgan and Wells Fargo were basically unscathed and Bank of America were basically insolvent but not illiquid (Bank of America might not have been in trouble if it weren't for Merrill Lynch).

Commercial banks in the US may have been largely unaffected but I can assure you that in many other countries they required rescue because they were so deeply involved in ultimately worthless securitised debt obligations, mainly from the US. The UK and Iceland are two prime examples. One big reason for the collapse of UK commercial banks was that they had insufficient funds in secure and liquid assets that could cover the losses that emerged in the riskier parts of their business. Glass-Steagall (or similar regulation as was) addressed exactly that systemic weakness. So, in that sense a lack of Glass-Steagall type regulation turned the crisis into a drama or a full scale collapse of more than a few banks.

[Wage Slave]

Actually I don't mind if banks want to trade/invest in the stock market or invest in securitised debt obligations or anything else - As long as they are gambling their money and if they get it wrong they don't get a bailout. I like investing in the stock market for effortless reward too but I know very well that I had better not be playing with more money than I can afford to lose and that if I do lose no-one is going to come and rescue me. I also know that it is important to have the resources to be able to just sit out a severe market downturn - again without any outside help.

The real problem with banks, in the UK at least, was that they happily conflated their normal banking role with a wildly inflated and risky trading and investment role. That meant they had to be rescued no matter what or we would have had penniless people cluttering up the streets. That isn't acceptable. So they've been told they must be far more cautious about how much they keep in safe and liquid assets. There has also been some talk (much opposed by the banks) about separating the investment/trading part and the normal commercial part so if they former gets into trouble it can be jettisoned by the latter.

They have tended to react to all this by restricting lending, especially to business, claiming they are being forced to be over cautious and hold too many assets in reserve. Meanwhile a glance at the rise in the stock market's value here in Japan and elsewhere is sufficient to tell you where a lot of the money from QE went.

Recently they may well have pulled some back out in a bit of a panic but it will be back, unless they are regulated more tightly - and we all know how that fits with the dominant neo liberal political and economic orthodoxy. Meanwhile, I can't help but feel that small and medium size businesses are being choked of finance.

It's interesting to note how fast crowdfunding and peer to business lending has grown in the US and UK. There are clearly a lot of very good businesses who can pay anything up to (and beyond) 10% interest on secured borrowing who are simply being told to fuck off by the commercial banks these days.

[Russell]

Actually I don't mind if banks want to trade/invest in the stock market or invest in securitised debt obligations or anything else - As long as they are gambling their money and if they get it wrong they don't get a bailout. I like investing in the stock market for effortless reward too but I know very well that I had better not be playing with more money than I can afford to lose and that if I do lose no-one is going to come and rescue me. I also know that it is important to have the resources to be able to just sit out a severe market downturn - again without any outside help.

The real problem with banks, in the UK at least, was that they happily conflated their normal banking role with a wildly inflated and risky trading and investment role. That meant they had to be rescued no matter what or we would have had penniless people cluttering up the streets. That isn't acceptable. So they've been told they must be far more cautious about how much they keep in safe and liquid assets. There has also been some talk (much opposed by the banks) about separating the investment/trading part and the normal commercial part so if they former gets into trouble it can be jettisoned by the latter.

This!

The health of the banks in the EU was/is actually much worse than in the U.S., because the EU banks had/have much higher leverage.

Nevertheless, inflames' statement that banks like Wells Fargo were unaffected is not completely true. I remember that Wells Fargo, for example, also had to be bailed out, though they were one of the healthiest of the bunch.

[Samurai_Jerk]

Japanese Market Close to Reading Last Rites Over Abenomics

When Prime Minister Shinzo Abe launched his three-pronged programme to revive Japan's stagnant, deflationary economy three years ago, the stock market cheered every step along the way.

Not any more.

The "third arrow" of Abenomics -- reforms to make the economy more productive -- is barely a work in progress, but Abe got straight to work on the first two, fiscal expansion and monetary stimulus, with the enthusiastic support of a new governor at the Bank of Japan (BOJ), Haruhiko Kuroda.

In the first year of the programme, the Nikkei index jumped nearly 60 percent, drawing in a net 15 trillion yen (88 billion pounds) of foreign cash. Enthusiasm for Kuroda's bold stimulus, in particular, was strong, with each of his first two money-printing announcements prompting a 7 percent weekly surge.

His decision last week to introduce negative interest rates was equally bold, and quite unexpected, but as Abe's arrows have sailed wide of their target, investors have sat on their hands.

"The market's reaction is getting duller day by day. The negative interest rates boosted the market only for two days," said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities, and trading data shows even that was down to short-term "gamblers", he added.

A week later, even those gains are gone, as foreign investors withdrew a net 207 billion yen from the market, taking their total for 2016 to more than 1 trillion yen. U.S.-based Japanese stock funds also saw an outflow in the week ended Feb 3.

Though the Nikkei is up about 36 percent since Kuroda was appointed in March 2013, the yen has weakened from 95 to nearly 117 to the dollar over that period, so in dollar terms it is up only 10 percent, less than half the rise seen on the U.S. S&P 500 index.

[Wage Slave]

And the Nikkei is down about 5% today after sharp falls in Europe and the US overnight.

[Samurai_Jerk]

And the Nikkei is down about 5% today after sharp falls in Europe and the US overnight.

And the yen is about 114 to the dollar today.

[Wage Slave]

Yep. People still believe it is a safe haven. That's the last thing Japan wants and bless them they have done everything in their power to try and disabuse the notion but still they flee to Yen.

It's now as if the negative interest rate thing never happened.