Some Fed Bond Purchases Spurred Hiring, Central Bank Paper Says

WASHINGTON—At least some of the Federal Reserve’s bond buying in the wake of the 2008 financial crisis bolstered employment, according to a recent paper by staffers at the central bank’s board of governors.

The third round of such purchases, also known as quantitative easing, starting in late 2012, spurred banks with large holdings of mortgage-backed securities to lend more to companies, authors Stephan Luck and Tom Zimmermann found. Shortly thereafter, U.S. counties with such banks saw faster employment growth—up to 0.4 percentage point more per quarter—than counties where banks held fewer mortgage-backed securities.

Employment growth in the two sets of counties was similar for more than 18 quarters before the implementation of QE3, as the program was known.

The findings come as policy makers continue to debate the full impact of the unconventional stimulus measures taken by the Fed after interest rates, reduced to near zero by the end Continue reading "Some Fed Bond Purchases Spurred Hiring, Central Bank Paper Says"

KKR leads $57 mln round for Clarify Health

Clarify Health Solutions Inc said Sept. 10 that it raised $57 million in Series B funding led by KKR. Clarify Health, of San Francisco, provides care guidance technology. PRESS RELEASE SAN FRANCISCO & NEW YORK–(BUSINESS WIRE)– Clarify Health Solutions, Inc. (“Clarify” or the “Company”), a pioneer in real-time care guidance technology, today announced that it has closed $57 million in a Series B financing round led by KKR, a global investment firm. Building upon the Company’s rapid customer expansion in 2018, the injection of new capital will fuel the Company’s growth on its mission to power the personalization and optimization of every care journey.
Clarify brings hospital, health insurance, and life sciences customers the latest financial services and consumer technologies coupled with the deep clinical expertise needed to power innovative care delivery models. Clarify’s solutions deploy predictive analytics and machine learning on a comprehensive data set of over 20 terabytes – representing clinical, claims, social determinant,
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QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing?

QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing? Dong Beom Choi, Hyun-Soo Choi, and Jung-Eun Kim Liberty Street Economics March 29, 2017       Quantitative easing (QE)—the Federal Reserve’s effort to provide policy accommodation lowering long-term interest rates at a time when the federal funds rate was near its lower bound—has… Read More The post QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing? appeared first on The Big Picture.

Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to. But did things have to get this mean? From CLSA’s Benthos:
Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

Continue reading: Discussing the BoJ’s alleged impotence…

Koo on why helicopter money just won’t work

Helicopter money won't work in Japan, says Nomura's Richard Koo in a note on Tuesday, because when the typical Japanese citizen finds a 10,000-yen note lying on the ground, she will turn it in at the nearest police station rather than spend it. Put differently, a helicopter money policy can only work if the people in a country have little sense of right and wrong. Koo, of course, is talking about the effectiveness of actual banknotes being thrown out of helicopters in the sky. It's one of four ways he thinks helicopter money policy could be implemented -- since the real challenge with helicopter money is how it would be distributed, and to whom. Continue reading: Koo on why helicopter money just won’t work

Koo: Why US Quantitative Easing “worked” better than other QEs

This is a guest post from Richard Koo, chief economist of the Nomura Research Institute and, amongst many other things, author of “The Holy Grail of Macroeconomics, Lessons from Japan’s Great Recession”, which lays out his balance sheet recession thesis in detail. The post is an updated extract from his most recent note for Nomura and reproduced here, with his permission, for your arguing pleasure… The US, the UK, Japan, and Europe all implemented quantitative easing (QE) policies, but the understanding of how those policies work apparently differs greatly from country to country, leading to very different outcomes. With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case. Continue reading: Koo: Why US Quantitative Easing “worked” better than other QEs

This Bundless world…

One of the little-remarked consequences of the Brexit vote in the UK is that the subsequent generalised tightening of sovereign yields across the eurozone means that even less euro-core government paper qualifies for Draghi's QE programme. There are dangers in the ECB ignoring this looming problem. Here's a cheat sheet on action that could be taken. Continue reading: This Bundless world…

Markets and Politics in 2016

Markets and Politics in 2016
David R Kotok
Cumberland Advisors, July 7, 2016

    As the second half of 2016 unfolds, politics seem to be the single dominant global force. Markets either ignore politics or panic in the face of them. Let’s take an inventory.


Certainly all eyes will watch continually as the evolution of Brexit changes the government of the UK — and maybe ultimately of Scotland and Northern Ireland. Both of these are component parts of the UK. Both have active majorities that voted Remain.

Many ask what will happen to London as a financial center. There are already indications that certain financial institutions are rethinking their London activities. Those from elsewhere in the world are altering the amount of credit exposure they will have in the United Kingdom. The surprising Brexit outcome has changed the risk profile permanently.

Meanwhile, competitors line up for their pieces

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Financial plumbing and the choice of balance sheet(s)

This guest post from Manmohan Singh warns that while QE created excess reserves, removing those reserves from the system will have an important impact on the markets’ financial plumbing – and that will need to be incorporated in monetary policy decision making. Singh is the author of Collateral and Financial Plumbing and a senior economist at the IMF. Views expressed are his own and not of the IMF.
Expanded central bank balance sheets that silo sizeable holdings of US Treasuries, UK Gilts, Japanese Government Bonds (JGBs), German Bunds and other AAA eurozone collateral have placed central bankers in the midst of market plumbing. It’s now going to be very difficult for them to walk away from that role. Continue reading: Financial plumbing and the choice of balance sheet(s)


The New York Times headline read “Negative 0.5% Interest Rate: Why People Are Paying to Save.” Here is the link to a story that gives some perspective on this issue of negative rates. My colleague, Chicago-based Bob Malvenda, notes that the hundreds of comments on the NY Times piece are instructive, revealing understandings and misunderstandings surrounding this negative rate issue. You can read the article here: 

There are nearly 400 comments. Cumberland Advisors readers may want to sample some of them to check out what NY Times readers are saying. Four hundred is a large enough sample to allow for development of some inferences about NY Times readers and their understanding of negative rates.

Here are some bullets on the issue of negative rates and what they mean for investments in 2016 and beyond.

1.   There is some history with negative

Continue reading "NIRP"

Returning to “Normal”

Americans traditionally look at interest rates as the guide for monetary policy and have done so for half a century. We debate over whether nominal interest rates or real (inflation-adjusted) interest rates are the primary determinants of positive or negative outcomes from our central bank’s monetary policy. Americans don’t usually consider the other, non-interest-rate elements of monetary policy-making in their historical context. We tend to be focused on US-centric history.

However, there are other forms of monetary policy, and they have been applied extensively in other places in the world. The Banque de France recently released a paper entitled “No. 17: Monetary policy without interest rates, the French experience with quantitative controls (1948 to 1973),” in which research economist Éric Monnet describes 25 years of the French experience following World War II, focusing on non-interest-rate monetary policy-making. It is a thoughtful paper with lots of citations to direct serious readers

Continue reading "Returning to “Normal”"

A Timeline of the Federal Reserve in 2010

Federal Reserve Chairman Ben Bernanke walked with Fed Gov. Donald Kohn on Fridayoutside the Jackson Lake Lodge before the opening session of the Kansas City Fed’s annual symposium near Jackson Hole, Wyo. in August 2010.
The recession was over in 2010, but the Federal Reserve’s work had just begun. The U.S. central bank confronted stubbornly high unemployment and sluggish economic growth at home and financial strains emanating from Europe, where the Greek debt crisis was emerging as a major concern for the eurozone. The Fed held short-term interest rates near zero through the year. After months of internal debate, Chairman Ben Bernanke in November won support for a $600 billion bond-buying program a second round of quantitative easing aimed at stimulating the economy. The Fed also saw personnel changes in 2010, including the departure of Vice Chairman Donald Kohn. He was succeeded by Janet Yellen Continue reading "A Timeline of the Federal Reserve in 2010"

Unconventional monetary policy through the Fed’s rear-view mirror

Unconventional monetary policy through the Fed’s rear-view mirror
December 07, 2015
“The problem with quantitative easing is that it works in practice, but not in theory.”
-Ben S. Bernanke

On December 16, the Federal Open Market Committee is poised to hike interest rates, putting an end to the near-zero interest rate policy that began in December 2008. So, it’s natural to step back and ask what this episode has taught us about monetary policy at the near-zero lower bound for nominal interest rates. This is not merely some academic exercise. The euro area and Japan are still constrained by the zero bound. And, in this era of low inflation and low potential growth, policy rates in advanced economies are likely to hit that lower bound again (see, for example, here). How the Fed and other central banks respond when that happens will depend on the lessons drawn

Source: Federal Reserve Bank of Cleveland and authors' dates.
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On the actual reality of no more petrodollars

About a year ago — a few days before Opec spooked the world with its decision to wage war on shale producers with an oil production race to the bottom, but following a few months of steady oil declines post the Fed’s decision to start signalling an upcoming tightening path — we speculated regarding a what if scenario based on the hypothetical eventuality of no petrodollars : Continue reading: On the actual reality of no more petrodollars

A wink and a nod later… and the debt is monetised

In the even of a new downturn please press the giant red button. To do so please break through the glass emblazoned with the words “political reality”. What to do if the world turns sour is, of course, a fair question. And one that Andy Haldane recently tackled while discussing 5000 years of dread, the record low interest rates and stretched central bank balance sheets, we are currently seeing. Citi are starting to point to a new global recession too, triggered by EM and a stumbling China. We’re not sure we buy that just yet but here’s Citi’s Englander with what he think is coming down the policy path in response, with our emphasis:
We now think that the move to central banks endorsing fiscal policy and essentially monetizing the added spending will be relatively quick and direct, in the event of a sudden slump in the global activity.

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5 Points to Watch in the ECB’s September Meeting

Bloomberg News
Is it time to take the European Central Bank’s stimulus off cruise control? This is the key question heading into Thursday’s policy meeting. The ECB has been buying roughly €60 billion ($67.7 billion) per month in public and private bonds–mostly government bonds–since March. The program, known as quantitative easing or QE, is intended to run at least through September 2016. Until recently, economists expected the ECB to remain steadily on this course, and that any debate on extending the purchases was unlikely until sometime next year. But events in financial markets and China–coupled with lower oil prices–have narrowed that calendar. Annual inflation was 0.2% last month, far below the ECB’s target near 2%. Given the plunge in oil prices last month that has yet to work through the economy, consumer prices are likely to stay super low for months. The ECB can take some comfort from
Continue reading "5 Points to Watch in the ECB’s September Meeting"