CRASH IS COMING ? :: The price of coal has been crashing again

Coal accounts for approximately 40 percent of all electrical generation on the entire planet.  When the price of coal starts to drop, that is a sign that economic activity is slowing down.

Just prior to the last financial crisis in 2008, the price of coal shot up dramatically and then crashed really hard.  Well, guess what?  The price of coal has been crashing again, and it is already lower than it was at any point during the last recession.

Watch the price here : http://www.infomine.com/investment/coal/

Related Posts

  • 88
    We get some strong deflation signs in USA last 3 months, economic numbers not too good only thing rising is debt and consumer confidence.  
    Tags: economic, economy, crash
  • 86
    The price of iron ore has been crashing as well. It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China… There is no better measure of the true contraction underway in China…
    Tags: price, well, crashing, drop, coming, percent, crisis, crash, economy
  • 77
    Half of the 41 fracking companies drilling for shale oil and gas in the US will be dead or sold by year-end amid steep crude price declines, Bloomberg reports.  An executive with Weatherford International Plc said slashed spending by oil companies has put much of the US fracking industry at risk.…
    Tags: dramatically, price, coming, crash, economy
  • 76
    The fast food chain is targeting 700 poor performing restaurants for closing this year, according to a McDonald's news release in which it reported losses not only in the United States, but in Europe and Asian as well. First quarter comparable sales in the United States decreased 2.6 percent and…
    Tags: percent, economy, crash
  • 76
      Source : http://www.alhambrapartners.com/2015/08/14/the-dollar-run-hits-the-corporate-bubble/ The ‘Dollar’ Run Hits The Corporate Bubble by Jeffrey P. Snider in Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets Tags:asian flu, asset bubbles, china, convertibility, corporate bond bubble, dollar run, eurodollar standard,global recession, high yield, interbank, junk, leveraged loans, Repo, wholesale funding, yuan By the behavior of…
    Tags: financial, economy, crash

Crash is coming ? :: McDonald’s Closing Hundreds of Stores in US, Asia After Losses

The fast food chain is targeting 700 poor performing restaurants for closing this year, according to a McDonald’s news release in which it reported losses not only in the United States, but in Europe and Asian as well.

First quarter comparable sales in the United States decreased 2.6 percent and operating income for the quarter fell by 11 percent, according to the company. First quarter comparable sales in Europe declined 0.6 percent while operating income tumbled 20 percent.

“APMEA’s first quarter comparable sales decreased 8.3 percent primarily due to the impact of prolonged, broad-based consumer perception issues in Japan, along with negative but improving performance in China,” said McDonald’s about its Asia market. “For the quarter, APMEA’s operating income declined 80 percent … due to strategic restaurant closings and other charges and negative operating performance in Japan and China.”

Bloomberg Business reported that McDonald’s Holding Co. in Japan would likely lose $318 million this year and sales were expected to drop 10 percent. Along with the store closing in Japan, the company had hoped to revamp 2,000 others over the next several years.

McDonald’s Holding president Sarah Casanova said she would take a 20 percent pay cut over the next six months and other directors would take 15 percent salary cuts in the transition as 100 jobs would be lost in Japan.

Time magazine reported that while the 700 store closings is a small percentage of the roughly 32,500 restaurants McDonalds operates globally, it shows that the fast food king is serious about aggressively taking steps about turning around its fortunes and staying No. 1.

“As the world’s leading restaurant company, we are evolving to be more responsive to today’s customer,” said Steve Easterbrook, McDonald’s president, adding that more information will be shared about the restaurants turnaround plans on May 4.

“McDonald’s management team is keenly focused on acting more quickly to better address today’s consumer needs, expectations and the competitive marketplace. We are developing a turnaround plan to improve our performance and deliver enduring profitable growth,” said Easterbrook

Related Posts

  • 78
    We get some strong deflation signs in USA last 3 months, economic numbers not too good only thing rising is debt and consumer confidence.  
    Tags: consumer, economy, crash
  • 76
    Coal accounts for approximately 40 percent of all electrical generation on the entire planet.  When the price of coal starts to drop, that is a sign that economic activity is slowing down. Just prior to the last financial crisis in 2008, the price of coal shot up dramatically and then…
    Tags: percent, crash, economy
  • 75
    The price of iron ore has been crashing as well. It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China… There is no better measure of the true contraction underway in China…
    Tags: china, percent, crash, economy
  • 69
    Half of the 41 fracking companies drilling for shale oil and gas in the US will be dead or sold by year-end amid steep crude price declines, Bloomberg reports.  An executive with Weatherford International Plc said slashed spending by oil companies has put much of the US fracking industry at risk.…
    Tags: year, company, crash, economy
  • 67
    (Source : http://qz.com/486476/everything-youve-heard-about-chinas-stock-market-crash-is-wrong/ ) This week’s Chinese stock market implosion has been widely viewed as a reaction to the Chinese government’s devaluing the yuan on Aug. 11—a move many presume was a frenzied bid to lower export prices and strengthen the economy. This interpretation doesn’t stand up to scrutiny. First, Chinese…
    Tags: china, economy, crash

Crash is coming ? :: Half of US fracking firms to die this year

Half of the 41 fracking companies drilling for shale oil and gas in the US will be dead or sold by year-end amid steep crude price declines, Bloomberg reports. 

An executive with Weatherford International Plc said slashed spending by oil companies has put much of the US fracking industry at risk.

There were 61 fracking service providers in the US at the start of last year but customers leave wells uncompleted because of low prices, according to Bloomberg.

Weatherford operates the fifth-largest fracking operation in the US. Its pressure pumping marketing director Rob Fulks says the service company has been forced to cut costs “dramatically” in order to persuade producers not to abandon work.

In February, Weatherford announced plans to cut about 8,000 jobs, or 14% of its workforce, this year in response to the decline in oil prices.

Bigger players such as Halliburton and Baker Hughes are entering into mergers. Others are selling chunks of their assets.

The US “rig count” has fallen from 1,608 in October to 747.

Related Posts

  • 78
    We get some strong deflation signs in USA last 3 months, economic numbers not too good only thing rising is debt and consumer confidence.  
    Tags: economy, crash
  • 77
    Coal accounts for approximately 40 percent of all electrical generation on the entire planet.  When the price of coal starts to drop, that is a sign that economic activity is slowing down. Just prior to the last financial crisis in 2008, the price of coal shot up dramatically and then…
    Tags: price, dramatically, coming, crash, economy
  • 75
    The price of iron ore has been crashing as well. It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China… There is no better measure of the true contraction underway in China…
    Tags: price, will, coming, crash, economy
  • 69
      Source : http://www.alhambrapartners.com/2015/08/14/the-dollar-run-hits-the-corporate-bubble/ The ‘Dollar’ Run Hits The Corporate Bubble by Jeffrey P. Snider in Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets Tags:asian flu, asset bubbles, china, convertibility, corporate bond bubble, dollar run, eurodollar standard,global recession, high yield, interbank, junk, leveraged loans, Repo, wholesale funding, yuan By the behavior of…
    Tags: will, economy, crash
  • 69
    The fast food chain is targeting 700 poor performing restaurants for closing this year, according to a McDonald's news release in which it reported losses not only in the United States, but in Europe and Asian as well. First quarter comparable sales in the United States decreased 2.6 percent and…
    Tags: company, year, economy, crash

Keynesian central bankers will do almost anything to fight deflation and that ultimately this will lead to a global currency crisis in the near future.

 

During this 40+ minute interview, Jason asks Mish about interest rates and financial repression and if he thinks the Federal Reserve is trapped and can they meaningfully raise interest rates?

Mish says the Fed would probably never admit they are trapped and is probably too stupid to know they are basically trapped.

Jason and Mish discuss financial repression in the US, Japan, etc.

Next, Jason asks Mish about his recent article about the pension plan crisis developing in the US.

Mish and Jason discuss if asset price inflation is intentionally being done to help generate higher returns for pension funds?

After this, Jason asks Mish about asset price inflation, bubbles and where Mish still sees value in markets. Mish likes gold, gold miners, Japanese stocks most.

Jason asks Mish about the oil market and they discuss job losses because of the US shale oil bust is happening now even though oil may have bottomed.

Jason and Mish then talk about inflation, currency wars, deflation and currency pegs.

Mish says Keynesian central bankers will do almost anything to fight deflation and that ultimately this will lead to a global currency crisis in the near future.

To end the interview, Jason asks Mish about the SDR and if CHina wants the World Reserve Currency?

Mish says China doesn’t want the burden of the world reserve currency, at least not anytime soon.

 

Related Posts

  • 81
    So, the governor of the Bank of England, Mark Carney, is filling his fountain pen, and looking for a stamp. Now that inflation has fallen to 0.5% on the Consumer Prices Index (CPI) measure, he's got to write a letter to the chancellor, explaining why inflation has missed the Bank's…
    Tags: inflation, economy
  • 76
    http://www.teslamotors.com/sites/default/files/blog_attachments/gigafactory.pdf
    Tags: economy
  • 76
    The US Dollar’s status as a reserve currency seems to be a perennial concern for many people these days.  I think this concern is often dramatically overstated.  I was reminded of this point as I was reviewing the slides from Jeff Gundlach’s presentation yesterday which showed the following chart: Source…
    Tags: currency, reserve, will, economy
  • 76
    The plunge of the lira has already exposed the Turkish economy’s dependence on short-term foreign investment. Most foreign capital is invested in Turkish stocks and bonds rather than longer-term projects. All it takes is a phone call or a few clicks of a mouse for short-term investors to move their…
    Tags: economy, currency
  • 75
    Follow up of my post on BIG COMPANIES NOW HAVE A HAND IN THE COLLABORATIVE ECONOMY Here is one picture.
    Tags: economy

BIG MARKET NEWS WEEK 27 APR 2015 – 01 MAY 2015

This Week : April26 – May2

 

Australia Tuesday, April 28, 2015 00:40  
AUD       RBA’s Governor Glenn Stevens Speech
United Kingdom Tuesday, April 28, 2015 10:30  
GBP       Gross Domestic Product (QoQ) (Q1)Preliminar
United States Tuesday, April 28, 2015 16:00  
USD Consumer Confidence (Apr)
New Zealand Wednesday, April 29, 2015 00:45  
NZD Trade Balance (MoM) (Mar)
New Zealand Wednesday, April 29, 2015 03:00  
NZD ANZ Business Confidence (Apr)
United Kingdom Wednesday, April 29, 2015 14:30  
USD       Gross Domestic Product Annualized (Q1)Preliminar
United Kingdom Wednesday, April 29, 2015 20:00  
USD Fed Interest Rate Decision
New Zealand Wednesday, April 29, 2015 20:00  
NZD Monetary Policy Statement
New Zealand Wednesday, April 29, 2015 20:00  
NZD RBNZ Interest Rate Decision
Japan Thursday, April 30, 2015 05:00  
JPY BoJ Monetary Policy Statement
Japan Thursday, April 30, 2015 05:00  
JPY BoJ Interest Rate Decision
Germany Thursday, April 30, 2015 09:55  
EUR Unemployment Change (Apr)
Germany Thursday, April 30, 2015 09:55  
EUR Unemployment Rate s.a. (Apr)
European Monetary Union Thursday, April 30, 2015 11:00  
EUR Consumer Price Index (YoY) (Apr)Preliminar
European Monetary Union Thursday, April 30, 2015 11:00  
EUR Consumer Price Index – Core (YoY) (Apr)Preliminar
Canada Thursday, April 30, 2015 14:30  
CAD Gross Domestic Product (MoM) (Feb)
United States Thursday, April 30, 2015 14:30  
USD Initial Jobless Claims (Apr 24)
China Friday, May 1, 2015 03:00  
CNY NBS Manufacturing PMI (Apr)
Australia Friday, May 1, 2015 03:30  
AUD Producer Price Index (QoQ) (Q1)
United Kingdom Friday, May 1, 2015 10:30  
GBP Markit Manufacturing PMI (Apr)
United States Friday, May 1, 2015 16:00  
USD ISM Manufacturing PMI (Apr)

 

Related Posts

  • 84
    This Week : April 5 – April 11   Spain Monday, April 6, 2015 09:00 EUR Unemployment Change (Mar) Canada Monday, April 6, 2015 16:00 CAD     Ivey Purchasing Managers Index s.a (Mar) United States Monday, April 6, 2015 16:00 USD ISM Non-Manufacturing PMI (Mar) Australia Tuesday, April 7,…
    Tags: april, united, calendar
  • 78
     Canada Monday, July 7, 2014 14:30     CAD Building Permits (MoM) (May)   Canada   Monday, July 7, 2014 16:00     CAD Ivey Purchasing Managers Index (Jun) New Zealand     Tuesday, July 8, 2014 00:00       NZD NZIER Business Confidence (QoQ) (Q2)   Australia Tuesday,…
    Tags: thursday, united, calendar
  • 78
    Japan Monday, Feb 16, 2015 00:50   JPY       Gross Domestic Product (QoQ) (Q4)Preliminar European Monetary Union Monday, Feb 16, 2015 24h   EUR Eurogroup meeting China    Monday, Feb 16, 2015 03:00   CNY New Loans (Jan) Australia    Tuesday, Feb 17, 2015 01:30   AUD RBA…
    Tags: united, wednesday, calendar
  • 77
        Canada Monday, Oct.20, 2014 14:30 CAD   Wholesale Sales (MoM) (Aug) Australia Tuesday, Oct. 21, 2014 02:30 AUD RBA Meeting's Minutes China Tuesday, Oct. 21, 2014 04:30 CNY   Gross Domestic Product (YoY) (Q3) China Tuesday, Oct. 21, 2014 04:30 CNY   Gross Domestic Product (QoQ) (Q3) Australia…
    Tags: wednesday, united, calendar
  • 76
     Japan Sunday, June 8, 2014 23:50      JPY Gross Domestic Product (QoQ) (Q1)  Japan   Sunday, June 8, 2014 23:50   JPY Gross Domestic Product Annualized (Q1)   China    Tuesday, June 10, 2014 01:30       CNY Consumer Price Index (YoY) (May) United Kingdom   Tuesday, June 10,…
    Tags: united, calendar

A journey from Idea to IPO.

First, let’s figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is “bootstrapping,” the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment, like MailChimp and AirBnB.

If you know the basics of how funding works, skim to the end. In this article I am giving the easiest to understand explanation of the process. Let’s start with the basics.

Every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That ‘piece of company’ is ‘equity.’ Everyone you give it to becomes a co-owner of your company.

https://wantrepreneurship.wordpress.com/2015/04/18/how-funding-in-startup-works-a-journey-from-idea-to-ipo/

Related Posts

  • 76
    (Source : http://outthinker.com/outthinkerblog/?p=250 ) Picture this scenario. A bomb has exploded. You’ve been working for the last two weeks in a remote part of Mongolia. Your boss promised this short-term assignment would prove your commitment and accelerate your career. But now, unsure of what happened or which coworkers were injured or…
    Tags: idea, startup
  • 75
    In 2009 Twitter was a 50-person company punching way above its weight in cultural impact, its micro-blogging platform blasting its way into the public imagination. But its ambitions were even higher. According to leaked internal documents, the company had privately set goals over the next few years of a billion…
    Tags: company, startup
  • 75
    Like the fictional animal, unicorn companies are supposed to be rare and magical. Last month, the Wall Street Journal compiled its own "Billion-dollar club" - a listof 78 venture-backed private companies with valuations of $1 billion or more. When a company hits a billion dollar valuation, most people assume the company is…
    Tags: companies, company, startup

“Economic therapy” called devaluation.

 

Low euro is like a “deflation” of the Euro. Is this good or bad ?

Lets talk about devaluation.

The idea being that the goods the nation has to offer will cost less with devaluation.

Good idea, right? Many countries have resorted to this economic maneuver in order to increase exports.

The question always is: are the benefits of the drug greater than the cost of theside effects?

The same concept needs to be applied to theEconomic therapycalleddevaluation.

Importing essential goods, like food, which must be imported because much of it is not available locally, suddenly costs more.

The increases in the cost of food adversely impacts morale.

I suggest to you that devaluation, like inflation, causes people to lose trust in the currency of the country.

The public feels ambushed by the government it has elected.

Everyone-from all socioeconomic groups-feel undermined by those they have chosen to lead their government.

Devaluation has short term benefits, but long term costs.

The benefits are easy to see: an increase in exports.

The costs are more difficult to assess or even notice.

People cut their saving, which impacts capital formation.

Consumption begins to increase as people start ridding themselves of money because it has an unstable value.

Most important of all, the lack of trust in government has its own repercussions,which are also hard to quantify, but they are there.

Devaluation is a mechanistic solution: cut prices, increase volume.

Related Posts

  • 76
    The European Debt Crisis Visualized http://www.bloomberg.com/
    Tags: europe, economy
  • 71
    There is no reason to further extend a European Union deadline for France to cut its budget deficit, the EU's top economic official said on Saturday, adding policy-makers should have learnt the lessons of the debt crisis and stuck to agreed rules. In June last year Paris got two more…
    Tags: cut, government, economy, economic, europe
  • 70
    Europe’s leaders argue that only deep budget cuts will revive the economy and inspire the necessary confidence among investors. The deal represents a major milestone for Greece, which was effectively shut out of the markets in 2010 when the debt crisis left it dependent on international bailouts to stay afloat.The…
    Tags: economic, costs, euro, countries, will, economy, europe
  • 67
    "There are no facts, only interpretations”, Friedrich Nietzsche once said. One needn’t be a nihilist or a relativist to be bemused at the latest radical rewriting of history from our official number-crunchers. Everything we thought we knew about the British economy’s performance over the past 15 years or so now…
    Tags: economy, drug, inflation, called, greater, europe
  • 64
      Feb 8 (Reuters) - If Greece is forced out of the euro zone, other countries will inevitably follow and the currency bloc will collapse, Greek Finance Minister Yanis Varoufakis said on Sunday. Greece's new leftist government is trying to re-negotiate its debt repayments and has begun to roll back…
    Tags: will, euro, europe, government, economy

BIG MARKET NEWS WEEK 13 APR 2015 – 17 APR 2015

China Monday, April 13, 2015 04:00
CNY Trade Balance (Mar)
New Zealand Tuesday, April 14, 2015 00:00  
NZD     NZIER Business Confidence (QoQ) (Q1)
United Kingdom Tuesday, April 14, 2015 10:30  
GBP Consumer Price Index (MoM) (Mar)
United States Tuesday, April 14, 2015 14:30  
USD Retail Sales ex Autos (MoM) (Mar)
United States Tuesday, April 14, 2015 14:30  
USD Retail Sales (MoM) (Mar)
United States Tuesday, April 14, 2015 14:30  
USD Producer Price Index (MoM) (Mar)
China Wednesday, April 15, 2015 04:00  
CNY Industrial Production (YoY) (Mar)
China Wednesday, April 15, 2015 04:00  
CNY Gross Domestic Product (QoQ) (Q1)
European Monetary Union Wednesday, April 15, 2015 13:45  
EUR ECB Interest Rate Decision
Canada Wednesday, April 15, 2015 14:30  
CAD     Manufacturing Shipments (MoM) (Feb)
European Monetary Union Wednesday, April 15, 2015 14:30  
EUR ECB Monetary policy statement and press conference
Canada Wednesday, April 15, 2015 16:00  
CAD BoC Interest Rate Decision
Canada Wednesday, April 15, 2015 16:00  
CAD BOC Rate Statement
Canada Wednesday, April 15, 2015 17:00  
CAD Bank of Canada Monetary Policy Report
Canada Wednesday, April 15, 2015 18:15  
CAD BoC Press Conference
Australia Thursday, April 16, 2015 03:30  
AUD Participation Rate (Mar)
Australia Thursday, April 16, 2015 03:30  
AUD Unemployment Rate s.a. (Mar)
Australia Thursday, April 16, 2015 03:30  
AUD Part-time employment (Mar)
Australia Thursday, April 16, 2015 03:30  
AUD Fulltime employment (Mar)
Australia Thursday, April 16, 2015 03:30  
AUD Employment Change s.a. (Mar)
United States Thursday, April 16, 2015 14:30  
USD Building Permits (MoM) (Mar)
United States Thursday, April 16, 2015 14:30  
USD Initial Jobless Claims (Apr 10)
United States Thursday, April 16, 2015 16:00  
USD Philadelphia Fed Manufacturing Survey (Apr)
Switzerland Friday, April 17, 2015 09:15  
CHF Real Retail Sales (YoY) (Feb)
United Kingdom Friday, April 17, 2015 10:30  
GBP Average Earnings including Bonus (3Mo/Yr) (Feb)
United Kingdom Friday, April 17, 2015 11:30  
GBP Claimant Count Change (Mar)
United States Friday, April 17, 2015 14:30  
USD Consumer Price Index (YoY) (Mar)
United States Friday, April 17, 2015 14:30  
USD     Consumer Price Index Ex Food & Energy (YoY) (Mar)
Canada Friday, April 17, 2015 14:30  
CAD Consumer Price Index (YoY) (Mar)
Canada Friday, April 17, 2015 14:30  
CAD Bank of Canada Consumer Price Index Core (YoY) (Mar)
United States Friday, April 17, 2015 16:00  
USD Reuters/Michigan Consumer Sentiment Index (Apr)Preliminar

Related Posts

  • 83
    Greece Monday, Dec. 29, 2014 24h EUR Presidential elections United States Tuesday, Dec. 30, 2014 16:00 USD Consumer Confidence (Dec) China Wednesday, Dec. 31, 2014 02:45 CNY HSBC Manufacturing PMI (Dec) United States Wednesday, Dec. 31, 2014 14:30 USD Initial Jobless Claims (Dec 19) China Thursday, Jan. 1, 2015 02:00…
    Tags: united, usd, states, trading, calendar
  • 81
    Greece Sunday, January 25, 2015 n/a   EUR Hellenic Parliament Elections Germany Monday, January 26, 2015 10:00   EUR IFO - Business Climate (Jan) Australia Tuesday, January 27, 2015 01:30   AUD National Australia Bank's Business Confidence (Dec) United Kingdom Tuesday, January 27, 2015 10:30   GBP Gross Domestic Product…
    Tags: united, usd, states, wednesday, trading, calendar
  • 76
    All time are GMT+2 Australia     Tuesday 13 May, 2014   11:30     AUD Budget Release Germany   Wednesday 14 May, 2014   08:00       EUR Harmonised Index of Consumer Prices (YoY) (Apr) United Kingdom     Wednesday 14 May, 2014   10:30     GBP…
    Tags: united, usd, states, wednesday, trading, calendar
  • 68
    This Week : April 5 – April 11   Spain Monday, April 6, 2015 09:00 EUR Unemployment Change (Mar) Canada Monday, April 6, 2015 16:00 CAD     Ivey Purchasing Managers Index s.a (Mar) United States Monday, April 6, 2015 16:00 USD ISM Non-Manufacturing PMI (Mar) Australia Tuesday, April 7,…
    Tags: april, mar, united, calendar
  • 66
    New Zealand Tuesday, March 31, 2015 02:00 NZD     ANZ Business Confidence (Feb) Germany Tuesday, March 31, 2015 09:55   EUR Unemployment Change (Mar) Germany Tuesday, March 31, 2015 09:55   EUR Unemployment Rate s.a. (Mar) United Kingdom Tuesday, March 31, 2015 10:30   GBP Gross Domestic Product (YoY)…
    Tags: april, mar, united, wednesday, usd, states, calendar

What do you think ? Do we need “Quantitative Easing for the People” instead ?

ECB’s QE programme launched this month is targeting wrong policy and likely to fuel an already massive bubble in stocks and bonds. It is also unlikely to help generate real economic growth, as it simply transfers more wealth to the financial markets.

Look at the facts: 

  • The Eurozone is suffering from structural stagnation that is driven by the lack of investment, anaemic domestic demand and policies, including taxation and enterprise regulation, that reduce entrepreneurship and make jobs creation and productivity growth (especially Total Factor Productivity) excessively costly.
  • Overall household and corporate indebtedness in the Euro area remain high despite several years of deleveraging.
  • Bank lending markets fragmentation contrasted by booming equity and bond markets shows that the problem is not in the lack of liquidity, but in over-leveraging present in the economy.


Experience in other countries
that recently deployed QE shows that current measures by the ECB are unlikely to provide sufficient stimulus to drive growth to the new (and higher) ‘normal’:

  • Japan, the US, and the UK experiences with QE show that monetary policies are useful to the real economy only when they are combined with either expansionary fiscal policies or real investment increases or both.
  • Even in such cases where QE has been successful, sustainability of QE-triggered growth has been weak in the presence of structural debt overhangs (Japan) and had to rely on structural drivers for growth present prior to the deployment of QE (the UK and the US).
  • In the Euro area, the idea is to combine QE with austerity policies and in the presence of dysfunctional financial markets. Such a program could increase misallocation of resources via bidding up financial assets prices over and above their long term fundamentals-justified levels.
  • Bank of England created £375bn over the course of its QE programme. By the Bank of England’s own estimates, QE in the UK pushed up share and bond prices by around 20%. But because around 40% of stock market wealth is held by the wealthiest 5% of households, QE has made that wealthiest 5% better off by around £128,000 per household.
  • You might want to check this post on the potential effects of QE on the real economy:http://www.zerohedge.com/news/2015-03-28/finally-very-serious-people-get-it-qe-will-permanently-impair-living-standards-gener


In short: the QE, as currently being carried out by the ECB, benefits the less-productive holders of financial assets, not the poor, nor the entrepreneurs, nor the real enterprise.

There is an alternative policy, a policy of “Quantitative Easing for the People”, an idea of distributing QE money directly to the citizens of the Euro area.

This is a more efficient approach for stimulating the real economy precisely because it puts liquidity directly at the point where it is needed most and can be used most efficiently, absent intermediaries, to address real structural problems present in the economy.

The plan is identical to the ECB current plan in terms of funds allocated: €60 billion will be created each month for 19 months. The amount each national central bank will create can also depend on its share of capital in the ECB, just as the current ECB QE programme envisages.

Each Eurozone citizen can receive ca €175 on average each month for 19 months.

  • The funds are taxable income, so there is a benefit to the Exchequers, allowing the governments to engage in expanded investment programmes or more efficiently close some of the budgetary gaps, while buying more time to implement structural reforms.
  • The funds (net of tax) can be used by households to accelerate debt deleveraging and/or repair their pensions funds and/or fund consumption.
  • As the result, “QE for the People” will stimulate domestic demand (consumption, investment and Government investment), while increasing the rate of debt deleveraging.
  • In addition, “QE for the People” can help improve banks’ balancesheets by increasing loans recovery (as households repay loans). In contrast, ECB QE will not have such an effect as it will be taking off banks balancesheets zero risk-weighted Government bonds.  Thus, “QE for the People” can be seen as a more efficient mechanism for repairing financial system transmission mechanism than ECB own QE policy.
  • The quantum of stimulus implied by the “QE for the People” proposal is significant. Take Ireland, for example. “QE for the People” means annual benefit of around EUR8 billion in direct stimulus (depending on how Ireland’s share is estimated). In 2014, Irish Final Domestic Demand grew by EUR6.15 billion. So the direct effect of this measure for just one year would be equivalent to more than full year worth of real economic growth.

 

19 economists from across Europe and outside signed last week’s FT letter proposing this plan (with some variations) to stimulate the real economy in the euro area. The original letter is available here:http://www.basicincome.org/news/2015/03/europe-quantitative-easing-for-people/.

 

Source : http://trueeconomics.blogspot.se/2015/03/31315-qe-for-people.html

Related Posts

This could end ‘very badly’

Why do we say so ?

  1. Easy money policies of recent years could lead to big problems.
  2. Warning indicators like the significant number of original general public offerings of organizations that are unprofitable, and substantial degrees of financial debt issued to firms, often with weak credit score.

Related Posts

  • 86
    http://www.teslamotors.com/sites/default/files/blog_attachments/gigafactory.pdf
    Tags: economy
  • 86
    Follow up of my post on BIG COMPANIES NOW HAVE A HAND IN THE COLLABORATIVE ECONOMY Here is one picture.
    Tags: economy, big
  • 83
    Greek debt tracker   As the government in Athens haggles with its lenders over economic reforms,Greece is running out of money. Here is what it owes in the upcoming months. http://www.ft.com/ig/sites/2015/greek-debt-monitor/
    Tags: debt, money, economy
  • 81
    This is a story about ARM Holdings (ARMH), the mobile technology company. But before it gets going, here are a few things you need to know: 1. ARM is a company made up mostly of chip engineers. They design parts of chips—such as graphics and communication bits—and they design entire…
    Tags: economy
  • 80
    Publicis CEO Maurice Levy's last-ditch offer to let Omnicom chief John Wren be CEO couldn't save the $35 billion deal to create the world's largest advertising company.   http://postcards.blogs.fortune.cnn.com/
    Tags: economy