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“Between Debt & The Devil”. An interview with Adair Turner, and a chance to win a copy of his book.

I spoke to Adair Turner last week about his new book, “Between Debt and the Devil”.  You can see my interview with him below.

Early in 2012, as the UK struggled to escape recession, I asked the question “if the government simply cancelled the £300 bn+ of QE gilts held by the BoE, who would be unhappy?”.  Would that have really let an inflation genie out of the bottle?  I argued that even if i…

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As economists predict a Fed rate hike, can we learn anything from the 2013 “Fed Fake”?

Thirty-five out of forty-one economists surveyed by Bloomberg currently expect the FOMC to hike the Fed Funds rate on September 17, thereby starting a period of policy normalisation. Most have pointed towards the July FOMC statement which noted better data on net in June and suggested some progress toward the conditions for lift-off. Those economists forecasting a rate hike will tell you that t…

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Inflation Surprises – what’s driving the current increases in market- and survey-based indicators of inflation expectations?

(blog originally posted on www.bruegel.org)

Euro area consumer price inflation, as measured by the HICP, continues to undershoot the ECB’s target of “close to, but below 2%”, currently at -0.1% in March. While it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inf…

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Competition winners for Richard Koo’s book: 10 copies of The Escape from Balance Sheet Recession and the QE Trap

Richard Koo popped by our office a few weeks ago to discuss his most recent book The Escape from Balance Sheet recession and the QE Trap.  You can see the interview here.  We asked who was the Japanese prime minister in 1997 who oversaw arguably Japan’s biggest policy error post the collapse of Japan’s debt fuelled bubble, and the answer was Ryutaro Hashimoto.

It is perhaps a little harsh to im…

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An interview with Richard Koo: The Escape from Balance Sheet Recession and the QE Trap

For years the Western world mocked Japan’s attempts to recover from its spectacular debt-fuelled boom and bust, blaming the Bank of Japan for doing far too little and far too late, and lamenting Japanese fiscal stimulus as extreme recklessness, where the only achievement has been to propel Japan’s debt levels into the stratosphere.

Now, seven years after much of the developed world’s own debt …

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Long US Treasury bonds are overvalued by 250 bps. Discuss.

As we started 2014 the US Treasury market was expecting 10 year yields to be at 4.13% in a decade’s time. This 10 year 10 year forward yield, derived from the yield curve, is a good measure of where the bond market believes yields get to if you “look through the cycle”, and disregard short term economic trends and noise. I wrote about it here and suggested that we were approaching the top of th…

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Duration, duration, duration – a review of bond market returns in 2014

This time last year many thought that duration management was going to be the key to success in 2014. Yields were expected to rise as the Fed weaned the market off QE and began to normalise rates. As a result, only the very brave would have been positioned long duration heading into 2014. To be positioned as such would presumably have taken some explaining, particularly when set against what se…

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UK QE and asset prices

Conservative QE and the zero bound.

It has been a while since we talked about QE, but we covered this substantially in the past (see for example ‘Sub Zero?’,  ‘QE – quite extraordinary‘ and ‘Quantitative easing – walking on custard‘). It now appears, at least for the time being, to be a part of monetary history in the UK, and more recently the US. However, it is being reapplied in Japan and about to do a grand tour of Europe. Our…

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€1tn increase required in ECB balance sheet to return to mid-2012 levels

Who’s the biggest winner if ECB buys corporates? The French

With the European Central Bank (ECB) purchasing €1.7bn of covered bonds last week, the Eurozone’s “QE-lite” programme has well and truly begun. Although the focus to date has been on covered and asset backed bonds, an article from Reuters last week spurred the market, due to a rumour that the ECB would soon be considering an extension to include secondary market corporate bond purchases. Althou…

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It’s the regulation, stupid: the ECB’s ABS purchase programme

The ECB is finally joining the Quantitative Easing (QE) party. Un-sterilised asset purchases have been a major policy tool in most of the developed world over the past few years but next month (as the Fed ends theirs, incidentally) the ECB will make its first foray into QE proper by embarking on an asset backed security (ABS) purchase programme.

Through this programme, focused on “simple, trans…

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