Tag: the European Central Bank (ECB)

Are All Yen Bets Off?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Is the short bet on the Yen over? Well, maybe not when it comes to trade vs. the Dollar. But as far as other weaker currencies, that's a different story. As it relates to the Euro, then indeed, the long bet on the EUR/JPY might be over. And here's the reason why.

Inflation might be coming back

That's a rather straightforward statement, but the Bank of Japan believes that inflation is inching higher. And while it's not as clear-cut a case a, let's say in the US, still there is a basis for it. When calculating Japan's inflation, excluding volatile prices such as food and energy, inflation gained 0.6%. Now, while that's still low, it's a move in the positive direction.

Moreover, a quick look at the inflation figures per segments and you can see most segments have experienced price increases. That is a mildly hawkish sign. It must be pointed out that the BOJ is about to change the way it measures core inflation. Going forward, the BOJ will publish core inflation figures, calculated both with and without energy prices. However, the BOJ will focus on core inflation excluding energy prices. Previously, by including them, it distorted the inflation figures into the downside. Continue reading "Are All Yen Bets Off?" →

Their Greece, And Now Ours

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


"You mean, you were serious?"

You can just hear Greek Prime Minister Alexis Tsipras asking the European Central Bank that question after the ECB called his bluff and refused to advance Greek banks any more emergency funds, forcing them to close for at least a week and the Athens stock market to also suspend trading. Needless to say, Greece will default on a $1.7 billion debt payment to the International Monetary Fund that comes due June 30.

Until the ECB finally learned how to say No (or, in this case, Nein) over the weekend, Tsipras was confident that his following the J. Paul Getty school of financial negotiating ("If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem") would work and that the ECB and its fellow official creditors to Greece would eventually knuckle under to his anti-austerity demands and continue to kick the can down the road yet again. Continue reading "Their Greece, And Now Ours" →

Does QE Really Work?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Perhaps you didn't hear about it, or if you did you dismissed it because of who said it, but I found some comments by Greece's finance minister over the weekend about the European Central Bank's quantitative easing bond buying program very insightful – and in synch with my own thoughts.

Speaking at the Ambrosetti Forum in Italy over the weekend, Yanis Vardoulakis warned that the ECB's purchases of sovereign bonds, which started last week, will create an unsustainable stock market bubble that is unlikely to boost private-sector investments in the euro zone.

"QE is all around us, and a great deal of optimism hangs on it," Varoufakis said in his speech, "Presenting an Agenda for Europe. "At the risk of sounding like a party pooper, let me say that I find it hard to imagine how the broadening of the monetary base in our fragmented, and fragmenting, monetary union will transform itself into a substantial increase in private investment in productive activity." Continue reading "Does QE Really Work?" →

Europe Is All Out Of Options

Posted on by The INO.com Team

Money makes the world go around, but it’s the trends, the big trends in money, that we find interesting and profitable.

This morning ECB president, Mario Draghi, who famously stated a couple of years ago that the ECB would do "whatever it takes" to stimulate the European economy. Well, clearly that little sound bite and some awkward moments (Greece, Spain, Portugal) were not enough as Europe remains mired in a recession.

So what does Europe do? Well, they trot out Mario Draghi again to announce another stimulus package. So far, the ECB has been wrong on its growth forecast as well as its inflation forecast. It doesn't exactly inspire confidence in their forecasting ability. Here is my take and it's simple - they have no idea how to get out of this economic hole. I never bought into the idea that getting out of a hole, meant you had to dig a deeper hole.

How are the markets going to react and translate this latest move by the ECB?

In today's video, I'll be looking at all the major markets. I'll take a look at how they are reacting to the ECB’s announcement of its 60 billion monthly bond buying program slated to continue well into 2016. Continue reading "Europe Is All Out Of Options" →

I Owe My Soul - Why Negative Interest Rates Are Only the First Step

Posted on by The INO.com Team

By: Jeff Thomas, International Man

In 1946, an American singer, Merle Travis, recorded a song called "Sixteen Tons." The song told the story of a poor coal miner in Kentucky, who lived in a small coal mining town. The town's economy revolved entirely around the mine.

The mining company owned a "company store," which had a monopoly on the sale of provisions. It charged rates that were designed to use up the weekly paycheque of the miner, so that the miner, in effect, was a slave to the mining company. As the song states,

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

Negative Interest Rates

Let's put the song aside for the moment and have a look at a concept that has been bandied about by the European Central Bank (ECB) for a while now. Since the collapse of the central banks would doom the world (their claim, not mine), it is essential that the banks be saved no matter what else must be sacrificed. Efforts to "save" the situation have been implemented through quantitative easing (QE) and the setting and continuation of low interest rates.

Unfortunately, in spite of record profits by banks and staggering bonuses handed out to senior bank executives, somehow the QE and low interest rates have not created the prosperity desired. The economy is still in the tank. What to do? Continue reading "I Owe My Soul - Why Negative Interest Rates Are Only the First Step" →