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Bad loans in banks to be regulated by ECB total €879 billion

Happy Halloween. It’s time for some scary charts.

Halloween is around the corner and that can only mean one thing… scary chart time. Every year around this time, we highlight economic variables and statistics that could give central bankers nightmares. If stuff like non-performing loans, bad forecasts and big numbers scare you then it is probably time to turn off your computer screen and forget you ever saw this blog. The following is not for …

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The lesson the Japanese economy has for the developed world

One of the most commonly reported themes in financial markets today is the fear of disinflation/deflation, and how monetary authorities need to take economic action to avoid becoming the “next Japan”. In February I commented on the fact that the fear of disinflation and deflation is not as logically straight forward as you may think. I think the common assumption that developed economies do not…

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Is Europe (still) turning Japanese? A lesson from the 90’s

Seven years since the start of the financial crisis and it’s ever harder to dismiss the notion that Europe is turning Japanese.

Now this is far from a new comparison, and the suggestions made by many since 2008 that the developed world was on course to repeat Japan’s experience now appear wide of the mark (we’ve discussed our own view of the topic previously here and here). The substantial pick…

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How do house prices feed into inflation rates around the world? It’s important for central banks, and for bond investors.

After the collapse in real estate prices in many of the major developed nations during and after the Great Financial Crisis, housing is back in demand again. Strong house price appreciation is being seen in most areas of the US, in the UK (especially in London), and German property prices have started to move up. We’re even seeing prices rise in parts of Ireland, the poster child for the proper…

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Japanese investors are not buying foreign bonds, they’re selling

One of the stories that has driven global financial markets higher for the past few months has been about how Japanese investors are piling, or will pile, into foreign assets. Surely a rational Japanese investor would dump Japanese assets in an attempt to escape the exploding yen and the ravages of domestic inflation, or at the very least seek out a bigger yield than the puny returns available …

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Jim’s video from Tokyo – cup noodles, lessons about QE from the Edo period, and the fiscal multiplier effect

Last week Jim attended the annual meetings of the IMF and World Bank in Tokyo. For Bond Vigilantes, he took the camera along and documented his trip. Jim told me that the IMF and World Bank meetings, and even more the conversations and debates beyond the formal schedule, gave him some interesting food for thought. With the fiscal cliff arising and the UK’s failing experiment with austerity, Oli…

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Currency wars

Recently, we have often spoken about QE, and how it could result in the demise of the bond vigilante (topsy turvy), and the birth of the currency vigilante. Well, we are getting very close to the presumed launch of further unconventional monetary policy by the Fed on the 3rd of November. The market is trying to work out if it’s shock and awe or a gradual siege mentality that the Fed will deploy…

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Bernanke calls for a 4% inflation target

Well sort of.  It hasn’t got a lot of attention in the bond markets, but this week both Jon Hilsenrath in the WSJ, and subsequently Paul Krugman in the NYT have revisited Ben Bernanke’s paper Japanese Monetary Policy: A Case in Self-Induced Paralysis.  Bernanke wrote this in 1999 as an academic at Princeton University.  In it he calls on the Bank of Japan to set a “fairly high” inflation target…

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Turning Japanese I Think We’re Turning Japanese I Really Think So (follow up)

There is only one explanation for why 2 year US Treasury yields broke below 0.5% today (an all time low), or why 10 year government bond yields in Germany and the US are currently 2.5% and 2.9% respectively.  Or, for that matter, why German 30 year bunds are now at just 3.2%.  The bond markets clearly think there is a very real and increasing risk that the developed countries are going to end u…

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The year is 2020, and the world is about to get hit by the next financial tsunami…(+ **competition time**)

The year is 2020, and at the centre of the financial tsunami is Japan.  Another decade of very low single digit growth has meant that debt to GDP has steadily climbed from 200% in 2010 to 300%, which is considerably higher than any other country.  Another ‘lost decade’ has meant that the Japanese government has been unable to meaningfully cut back on spending or increase taxes, since such behav…

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