Posts Tagged ‘Eur/Yen cross’

Notes From Underground: A Suggestion for Mario Draghi

December 8, 2014

Three years ago I wrote a blog suggesting that Bundesbank Axel Weber should become ECB President so that the Germans felt they had control of Europe’s monetary policy. My argument was simple: If the Germans controlled the ECB then Berlin MAY BE more willing to support a QE program. As Bernard Connolly argued 20 years ago, the French hoped to gain control of European monetary, thus remove the powerful influence of the Bundesbank. The French have worried that an ECB under the influence of German monetarist restrictions would favor tight money and with it a strong EURO. France and Italy have relied on the ability to depreciate their currencies during times of stress but a Bundesbank-infused ECB would be more reticent to follow the path of least resistance and the possibility of inflation.

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Notes From Underground: What Has the Bank Of Japan Wrought?

November 2, 2014

Late Thursday night, the BOJ surprised the markets with an acceleration in the pace of increasing the monetary base. The bank will increase its asset purchases to 80 trillion yen from a previous annual amount of 50-60 trillion yen. The bank will also purchase ETFs and J-REITs at an added 3 trillion yen a year, a massive amount of increase of its balance sheet. In Japan the BOJ‘s program is referred to as QQE for it is both a quantitative and qualitative program. As it is pointed out, the BOJ will wind up owning 75 percent of the JGB market as banks and pension funds unload BONDS onto the ultimate buyer of last resort. When Japan was in a deflationary economy, owning BONDS made perfect sense as negative prices gave rise to REAL HIGHER YIELDS.

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