Draghi Says ECB’s Bond-Buying Plan Working Better Than Expected (Really Mario?)

(Bloomberg) — Mario Draghi said the European Central Bank’s quantitative-easing program is working better than expected, even though the institution will take longer than intended to reach its inflation goal.

“We are satisfied with QE, as it has met and even surpassed our initial expectations,” the ECB president said in an interview with Greece’s Kathimerini published on Saturday. While “it presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around, levels that we consider sufficiently close to 2 percent,” that is largely because of a drop in oil prices, he said.

Draghi cited lower borrowing costs, rising credit volumes and better access to loans for small businesses as signs that QE is having a positive effect. Even so, with the inflation rate below zero for the first time since March, and an emerging-market slowdown posing risks, he has said the ECB is ready to expand its asset-purchase program if needed.

So, is the ECB bond-buying part deux really working better than expected?


Yes Mario, Eurozone inflation is negative.


And the rate of growth in household lending is also negative.


And the poor French. Their unemployment level (aka, jobseekers) keeps exploding since 2007.


When Greek GDP growth is better than Germany and France’s GDP growth, you know you’ve got trouble!


So Mario, HOW is the ECB’s QE working better than expected? Unless you expected it to fail in the first place?


Minneapolis Fed’s Kocherlakota Suggests EXTRAORDINARY PATIENCE In Reducing Monetary Accomodation

The Minneapolis Fed’s Kocherlakota just gave a speech hinting at negative interest rates!

The FOMC can achieve its congressionally mandated price and employment goals only by being extraordinarily patient in reducing the level of monetary accommodation. Indeed, to best fulfill its congressional mandates, the Committee should be considering reducing the target range for the fed funds rate, not increasing it.

Reducing the target range for the Fed Funds rate from 0.00% – 0.25%? That implies a negative Fed Funds target rate.

The effective Fed Funds rate is already 0.13%, the lowest in the Americas. Only Japan is Asia/Pacific is lower than the US. However, in EMEA, the Eurozone, Switzerland, Sweden, Denmark and the Czech Republic all have central bank policy rates lower than the US.


And former Fed Chair Ben Bernanke appeared on The Show withj Stephen Colbert claiming that The Fed was responsible for the labor market. Bernanke is responsible for deadly slow wage growth??


Like the slogan at pre-DVD movie rental shops, Kocherlakota is suggesting “Be kind, DON’T unwind! And go to negative interest rates.


China Dumping U.S. Government Debt (Deflation Alert!)

According to the Wall Street Journal, Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.


Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging-markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt.

Few analysts expect much higher yields in the Treasury market as a result. Foreign private purchases of U.S. debt have increased amid pessimism about the world economic outlook. U.S. firms and financial institutions continue to buy Treasurys, as do some foreign central banks.

Zero yield on shorter maturity Treasury bills are not a great sales point either.


As the US continues to see declining prices, except for home prices and the stock market.


To which both Janet Yellen and Stanley Fischer said “Say what??????????”


Pay Me My Money Down: US Debt Ceiling, Zero Treasury Yields and Kabuki Theater

The US Federal government has hit its statutory debt ceiling. Interestingly, the Federal debt level has remained constant for a while (since the US hit the debt ceiling).


The US Treasury keeps a cash balance to make its debt payments … until Congress raises the debt ceiling (again) which Congress will do after some Kabuki theater.


Recently, Treasury ran low on cash (again) and decided to pay down the Federal debt … just enough to issue more debt and there will be another paydown this week since Treasury should run out of cash first week of November.

Of course, the biggest holder of US Treasuries is … The Federal Reserve, followed by China and Japan. They are all yelling “Pay me my money down!” to Treasury.


We may see a similar episode of zero Treasury bill yields until the Federal debt ceiling is raised. After the requisite Kabuki Theater, of course.

Here is a photo of Vichy Republican John Boehner leading the debt ceiling hearings before retirement.

kabuki boehner

*A tip of the hat to Lee Adler of The Wall Street Examiner for monitoring Treasury activities so closely.

Paranoid! Treasury 3 Mo Bill Yield Hits 0 Percent For First Time! (As Inflation Approaches Zero)

Not only can’t The Federal Reserve generate any inflation,


they can’t even generate a positive yield on the 3 month Treasury bill.

Yes, the 3 month Treasury bill auction went off today … and for the first time, the 3 month Treasury yield is ZERO.


The return to investors is 0 percent for the three-month bills, with a $10,000 bill selling for $10,000.00. The return to investors is 0.066 percent for the six-month bills, with a $10,000 bill selling for $9,996.71.


The US yield curve is now officially pinned at 0% at 3 months.


Poor Janet Yellen must be getting PARANOID!


Central Banks Lose Bond-Market Credibility as Woes Mount (M1 Multiplier And Inflation Remain Low)

It is tough for a central bank like The Federal Reserve to have much credibility when they can’t even generate inflation to speak of.

Bloomberg (By Andrea Wong and Anchalee Worrachate)

More and more, bond traders are drawing the same conclusion: central bankers globally are coming up short in their attempts to combat the world’s economic woes.

Even after hundreds of interest-rate cuts and trillions of dollars in quantitative easing, the bond market’s outlook for inflation worldwide is approaching lows last seen during the financial crisis. In the U.S., Europe, U.K., and Japan, those expectations are now weaker than they were before their respective central banks began their last rounds of bond buying.

That’s leading investors to write off the Federal Reserve’s chances of raising interest rates this year and increase their bets that it will tighten less than policy makers forecast in the years to come. Speculation has also increased that the European Central Bank and Bank of Japan will need to step up their quantitative easing in the face of deflationary pressures, despite statements to the contrary from their own officials.

“There’s a lack of faith in monetary policy — you’ve thrown the kitchen sink at it, you’ve cut rates to zero, you’re printing money — and still inflation is lower,” said Lee Ferridge, the head of macro strategy for North America at State Street Corp. “It leads to a risk-off environment.”

Recent economic reports have renewed calls for major central banks to do more. Consumer prices in the euro region unexpectedly fell, deflation re-emerged in Japan, while wages in the U.S. stagnated yet again. International Monetary Fund Managing Director Christine Lagarde also signaled the organization is preparing to lower its outlook for the world economy.

To be sure, US inflation is near zero (despite home prices rising at about 5% per year).


Breakeven 1 yr inflation rates are now negative.


The M1 Multiplier continues to remain below 1 meaning that every dollar created by the FED (an increase in the monetary base M0) will result in a <1 dollar increase of the money supply (M1), as is evident from the figure below. So, the credit and deposit creation of commercial banks is limited in this case. The banks are still holding on to a lot of excess reserves.

We had a blip in core personal consumption expenditures, but even that is deflating.


M2 Money Velocity keeps falling after Fed intervention along with average hourly earnings growth.


So, sing along with Janet and The Federal Reserve Board of Governors as they to generate inflation or wage growth.


Bizarro World: Is The True US Unemployment Rate 65 Percent Rather Than 5.1 Percent?

Unemployment measures are all about HOW you count the numbers.

For example, The Federal Reserve wants you to believe that the civilian unemployment rate has fallen to 5.1%. That is, the number of unemployed divided by the size of the civilian labor force.


Looks good, doesn’t it?

Let’s add marginally attached workers. The unemployment/underemployment rate rises to 10.0%.


If we look at those NOT in the labor force divided by the civilian labor force, we see that the ratio is now over 60%.


If we include those NOT in the labor force in with those who are unemployed, the number changes from 5.1% to 65%. This is consistent with the decline in average hourly wage growth YoY.


Since 2010, for every person who dropped off the unemployment rolls, another joined the NOT in labor force rolls. Hence, a fairly consistent 65% rate since 2010. And for every person who is employed, there are TWO who are either unemployed or have dropped out of the labor force.

According to the Bureau of Labor Statistics, who is not in the labor force?

Persons not in the labor force are those who are not classified as employed or unemployed during the survey reference week.

Labor force measures are based on the civilian non-institutional population 16 years old and over. (Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces.) The labor force is made up of the employed and the unemployed. The remainder—those who have no job and are not looking for one—are counted as “not in the labor force.” Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force.

So, let’s call it the un/non employment rate? It does paint a different picture of the health of the labor market.

We are truly in Bizarro World.