Yippe-Ki-Ya
New Member
The Australian Business Economists Annual Dinner recently took place in Sydney. Keynote speaker was Reserve Bank of Australia (RBA) governor, Glenn Stevens.
Surprisingly, Mr. Stevens made one good point during his snooze-fest. He said:
"One is that the most useful economic forecasts, like weather forecasts, are those that are based on a good sense of the 'big forces', as well as on an understanding of the dynamics of how economies typically behave."
It's worth noting his speech compared two maligned groups of forecasters - economists and weathermen.
It's funny a central banker should say that. Seeing as central bankers spend their whole time manipulating economies.
Look no further than the RBA Committed Liquidity Facility (CLF) - another acronym to add to TALF, TARP, EFSF and many, many more.
Put simply, CLF is a joint-venture idea between the RBA and the Australian Prudential Regulatory Authority (APRA).
Under Basel III rules, banks need to carry more high-quality liquid assets on their books. Following the 2008 global economic meltdown central bankers thought banks should hold more government debt. Because that's safer.
The only trouble was... governments had just bailed out the banks. That increased their own liabilities and weakened weak bank balance sheets.
So now European banks have to hold lots of government debt which are impaired by the poor financial position of governments because they bailed out banks which forced them to go further into debt which led to the downgrade of their debt ratings which...
You get the point.
But don't worry. Australia doesn't have nearly as much government debt as Broken Europe. So the local solution is the CLF.
The Safest Assets in the Land - Aussie Mortgages!
This allows Aussie banks to deposit eligible securities with the RBA and in return the RBA will give the banks liquidity - cash.
The question is, what securities can the banks deposit with the RBA? You guessed it... good old residential mortgage-back securities (RMBS)... the safest security in the land... apparently.
With CLF, the bank agrees to buy the RMBS back from the bank at a fixed price at a later date. That's why it's called a repurchase agreement (Repo).
Supposedly this means there's no risk of a moral hazard problem... where the banks make any loan knowing the RBA will buy it... or is there?
Of course there is. There's always moral hazard when anyone guarantees to accept something in the future. Especially when there are no questions asked.
You see, the CLF is a banking bailout by another name. No-one will admit the entire global banking system is broke. So Aussie central bankers worked double-time to make sure Aussie banks can stay in the game.
They (like their U.S. and European counterparts) need to keep re-writing the banking rules in order to not go bust.
But the Aussie banking funny-business is just a sideshow. The real stuff is overseas.
This morning the Aussie market has taken off. Why? Because of this report from Bloomberg News:
"The euro rose after Italian daily La Stampa said the International Monetary Fund is preparing a 600-billion euro ($799 billion) loan for Italy in case the debt crisis worsens, without saying where it got the information."
We've lost count how many rumours we've seen from European newspapers about bailouts that never happen - remember the China-buying-Italian bonds rumour?
As we see it, it's another case of bureaucrats and central bankers manipulating the market. Which is funny because...
Bailout Rumourtrage
In March 2008, the Australian Securities and Investments Commission (ASIC) clamped down on "rumourtrage". That is, the spreading of false rumours "designed to harm a company, such as by forcing a share price down..."
In March 2010, ASIC put the campaign on ice... with only one prosecution.
Roll forward to today and we can see why the regulators have stopped targeting "rumourtrage". Because the only false rumours investors get are from insiders keen to stop the markets falling.
But maybe Italy will get an IMF bailout. However, don't think for a moment it's the final fix the Europeans have waited for.
As you should have learnt by now, the fixing of one problem only creates another problem.
Glenn Stevens says useful economic forecasts require "an understanding of the dynamics of how economies typically behave."
The reason central bankers interfere in markets is because they know how the markets would behave if they didn't interfere. Ultimately it would mean the end of central banking.
That's why you can be assured the bailouts and market manipulation will continue. The central bankers have far too much skin in the game to allow anything else.
Cheers.
Kris.
Surprisingly, Mr. Stevens made one good point during his snooze-fest. He said:
"One is that the most useful economic forecasts, like weather forecasts, are those that are based on a good sense of the 'big forces', as well as on an understanding of the dynamics of how economies typically behave."
It's worth noting his speech compared two maligned groups of forecasters - economists and weathermen.
It's funny a central banker should say that. Seeing as central bankers spend their whole time manipulating economies.
Look no further than the RBA Committed Liquidity Facility (CLF) - another acronym to add to TALF, TARP, EFSF and many, many more.
Put simply, CLF is a joint-venture idea between the RBA and the Australian Prudential Regulatory Authority (APRA).
Under Basel III rules, banks need to carry more high-quality liquid assets on their books. Following the 2008 global economic meltdown central bankers thought banks should hold more government debt. Because that's safer.
The only trouble was... governments had just bailed out the banks. That increased their own liabilities and weakened weak bank balance sheets.
So now European banks have to hold lots of government debt which are impaired by the poor financial position of governments because they bailed out banks which forced them to go further into debt which led to the downgrade of their debt ratings which...
You get the point.
But don't worry. Australia doesn't have nearly as much government debt as Broken Europe. So the local solution is the CLF.
The Safest Assets in the Land - Aussie Mortgages!
This allows Aussie banks to deposit eligible securities with the RBA and in return the RBA will give the banks liquidity - cash.
The question is, what securities can the banks deposit with the RBA? You guessed it... good old residential mortgage-back securities (RMBS)... the safest security in the land... apparently.
With CLF, the bank agrees to buy the RMBS back from the bank at a fixed price at a later date. That's why it's called a repurchase agreement (Repo).
Supposedly this means there's no risk of a moral hazard problem... where the banks make any loan knowing the RBA will buy it... or is there?
Of course there is. There's always moral hazard when anyone guarantees to accept something in the future. Especially when there are no questions asked.
You see, the CLF is a banking bailout by another name. No-one will admit the entire global banking system is broke. So Aussie central bankers worked double-time to make sure Aussie banks can stay in the game.
They (like their U.S. and European counterparts) need to keep re-writing the banking rules in order to not go bust.
But the Aussie banking funny-business is just a sideshow. The real stuff is overseas.
This morning the Aussie market has taken off. Why? Because of this report from Bloomberg News:
"The euro rose after Italian daily La Stampa said the International Monetary Fund is preparing a 600-billion euro ($799 billion) loan for Italy in case the debt crisis worsens, without saying where it got the information."
We've lost count how many rumours we've seen from European newspapers about bailouts that never happen - remember the China-buying-Italian bonds rumour?
As we see it, it's another case of bureaucrats and central bankers manipulating the market. Which is funny because...
Bailout Rumourtrage
In March 2008, the Australian Securities and Investments Commission (ASIC) clamped down on "rumourtrage". That is, the spreading of false rumours "designed to harm a company, such as by forcing a share price down..."
In March 2010, ASIC put the campaign on ice... with only one prosecution.
Roll forward to today and we can see why the regulators have stopped targeting "rumourtrage". Because the only false rumours investors get are from insiders keen to stop the markets falling.
But maybe Italy will get an IMF bailout. However, don't think for a moment it's the final fix the Europeans have waited for.
As you should have learnt by now, the fixing of one problem only creates another problem.
Glenn Stevens says useful economic forecasts require "an understanding of the dynamics of how economies typically behave."
The reason central bankers interfere in markets is because they know how the markets would behave if they didn't interfere. Ultimately it would mean the end of central banking.
That's why you can be assured the bailouts and market manipulation will continue. The central bankers have far too much skin in the game to allow anything else.
Cheers.
Kris.
: Theyre scumbags. Now lets all get drunk & laugh because theres SFA we can do We might aswell have a good time.....They are