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The end of ZIRP

Discussions about the economic and financial ramifications of PEAK OIL

Re: The end of ZIRP

Unread postby shortonoil » Wed 28 Oct 2015, 14:43:15

"Fortunately, the people that make the policy, have access to real time numbers, and the computational capacity to use those numbers."

Interesting that you would conclude that the CB's have a clue as to what they are doing? The CB's have taken $13 trillion out of their respective economies, and handed it over to the banks. In that respect I would totally agree that they knew exactly what they were doing.
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Re: The end of ZIRP

Unread postby AgentR11 » Wed 28 Oct 2015, 14:51:01

shortonoil wrote:"Fortunately, the people that make the policy, have access to real time numbers, and the computational capacity to use those numbers."

Interesting that you would conclude that the CB's have a clue as to what they are doing? The CB's have taken $13 trillion out of their respective economies, and handed it over to the banks. In that respect I would totally agree that they knew exactly what they were doing.


Of course they know what they are doing. This is on purpose. It is the only way the developed world can coast in comfort to the end of industrial civilization. All other pathways lead to starvation, rioting, revolutions, death, and mayhem, before its really necessary.

There is no escaping 7 billion people on the planet.

There is no magic want to wave that will create real growth.

The only thing the CBs are focused on is preventing deflation at all costs, and QE/ZIRP is how its done. I realize that there is a group that this policy is really, really sticking it too; but thats just too bad. Your slight economic distress is nothing compared to what would happen with a depression, with deflation, with crop financial failures, leading to wheating rotting in the fields while people in the cities starve.

That WILL NOT HAPPEN.
No amount of conspiracy whining will change that.

There will be NO DEFLATION.
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Re: The end of ZIRP

Unread postby AgentR11 » Wed 28 Oct 2015, 15:11:15

pstarr wrote:So let me get this right, AgentR11: DEFLATION is headed off with zero-interest free-money for the super wealthy? Which impoverishes the elderly. But the same free-money should also be good for anyone else who borrows, right? The economy rebounds and peak oil becomes the myth it always was. No energy (no pollution) and economic growth. The best of all worlds.


I never wrote that "the economy rebounds", or peak oil becomes a myth. In fact, I've written the opposite.

The economy will *NEVER* rebound. From here till the end, we're going to play a numbers game to keep the nominal inflation rate positive or at least very near zero. There are no tools that the CBs will not touch, no amount of people they will avoid bankrupting and destroying, to avoid sustained deflation. Sustained deflation is the end of the industrial economy. It can not survive contact with it.

If I felt the economy could rebound, I'd not worry about it at all; if there were real growth to hunt, the long term interest rates would go strongly positive and inflation would go strongly positive in the presence of all this free money. But there's not.

Growth is OVER.

All that is left is to play this numbers game to make sure the farmers, the real farmers farming calorie crops by the square mile, are always able to turn their harvest into enough cash to service their debt and plant the next season's crop. And similarly, that consumers will always be able to swipe a little plastic card in a machine and walk out of the store with at least 3k kcal/person/day. Nothing is more important than that; and anyone that thinks they'll manage to get in the way of that by mentioning the poor, suffering pensioners.. is delusional.
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Re: The end of ZIRP

Unread postby AgentR11 » Wed 28 Oct 2015, 15:42:04

Its a word and numbers game I guess. Final Stagflation isn't a bad name for it really. The only consumer metric that is important is getting bread distributed from the stores into pantries. The only finance metric that is important is getting wheat from the field and into the store as bread and flour.

ZIRP / QE let us do that all the way to the end of industrial civilization.
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Re: The end of ZIRP

Unread postby Tanada » Wed 28 Oct 2015, 16:32:30

Of course there are alternatives if your only goal is keeping the farmers farming and the delivery system delivering food. For example they could cancel all outstanding farm debt and give free money they digitize to the farmers in exchange for their crops which would encourage them to produce more crops next year. In essence I am saying the Government could become the purchaser of first resort by offering to buy all food crops for a set price high enough to encourage farming, no matter what the commodity markets do.
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Re: The end of ZIRP

Unread postby Sixstrings » Wed 28 Oct 2015, 20:03:23

We are *most likely* getting ready to head into a recession.

Canada's already been officially in recession for most of 2015, if I'm not mistaken.

Isn't Europe at zero growth, or in recession, too?

And then china -- their growth rate majorly stumbled, cut in half. It's still growth but thing is, that's really a recession when China slows down that much.

So.. we're still growing at like 2% or whatever.. but I think that's not going to last and by the time of the general election, we may be smack into another bad news big recession, with mass layoffs and the whole nine yards.

Which sucks. There was hardly any recovery as it is, for a lot of America, from the LAST recession, the "great recession."
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Re: The end of ZIRP

Unread postby SeaGypsy » Wed 28 Oct 2015, 20:29:18

China is not in a technical recession, calling a slowing growth rate a recession is revisionist. They are playing a subsidised industrial game with trillion dollar stakes against the likes of the global steel industry, selling at or even below cost, destroying already weak secondary commodities markets.

Overall growth is dead, but cannibalistic capitalism is maturing & will maintain the key strategy for investment for the forseeable future.
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Re: The end of ZIRP

Unread postby GoghGoner » Thu 05 Nov 2015, 10:11:18

China's manufacturing index has been in contraction for 8 months in a row. Based on that alone, you could make a decent argument China is in recession. Of course, if you would rather use the official GDP figures then we have a slowing of growth.

Anyway, the first sensible argument on when to raise interest rates was put forth by a Democratic congressman:

"As I argued then back in the summer, God's plan is not for things to rise in the autumn. As a matter of fact that's why we call it fall. Nor is it God's plan for things to rise in the winter, through the snow. God's plan is that things rise in the spring. And so if you want to be good with the Almighty, you may want to delay until May."


Also, Yellen said this week that going negative on interest rates was a tool that she would use, if necessary. Everybody is pretty confident on a December rate raise all of the sudden -- haha, on them.
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Re: The end of ZIRP

Unread postby Pops » Wed 18 Nov 2015, 19:04:49

The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
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Re: The end of ZIRP

Unread postby shortonoil » Wed 02 Dec 2015, 20:15:24

"Overall growth is dead, but cannibalistic capitalism is maturing & will maintain the key strategy for investment for the forseeable future."

Cannibalistic capitalism is now the only way to keep the oil flowing, and without oil the internet reverts to two tin cans, and string. The world is now like an animal caught in a trap; gnawing off its own limbs to escape; never thinking about where it is going to go, or how it is going to get there!
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Re: The end of ZIRP

Unread postby EdwinSm » Wed 16 Dec 2015, 11:13:37

Just a few more hours, to the expected rise.

It troubles me that so many commentators seem to indicate a very small rise will create trouble all over the world. It could be that they are saying the world economy is very fragile - or it could be that they don't want to loss the profits they make from "free money"?

Example of warning:
The World Bank warned in September that a US rate rise could increase the risks to emerging economies caused by disruptions to capital flows.
http://www.bbc.com/news/business-35111816
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Re: The end of ZIRP

Unread postby Subjectivist » Wed 16 Dec 2015, 11:31:31

EdwinSm wrote:Just a few more hours, to the expected rise.

It troubles me that so many commentators seem to indicate a very small rise will create trouble all over the world. It could be that they are saying the world economy is very fragile - or it could be that they don't want to loss the profits they make from "free money"?

Example of warning:
The World Bank warned in September that a US rate rise could increase the risks to emerging economies caused by disruptions to capital flows.
http://www.bbc.com/news/business-35111816


Realistically the profit difference between zero cost and 0.25 percent cost is only significant when you are talking about very big numbers.
0.25 percent on $10,000.00 is $25.00, which won't effect anyone who can qualify for that kind of a loan. Even if you are a big builder like Trump and need to borrow $100,000,000.00 it is only $250,000.00, insignificant compared to cost over runs if your project just gets delayed a week and you have to pay all those construction workers another pay period of salary.

To significantly effect anything the loans have to be in the tens or hundreds of billions, which is state and federal budget levels, not normal business levels.
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Re: The end of ZIRP

Unread postby Pops » Wed 16 Dec 2015, 11:44:16

Lots of the developing world took out cheap, dollar denominated loans in the days of free money.
Increasing the interest rate increases the demand for dollars, increasing the value of dollar and making payments on those loans much higher, relatively speaking.
I think too the easy dollars meant "money changers" could borrow here and loan there and make money from day one on just the difference is value.

Preventing inflation in the US is our concern, what happens down the road for everyone else is their problem.

I think...
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Re: The end of ZIRP

Unread postby ennui2 » Wed 16 Dec 2015, 19:48:05

If you look at these charts closer, you'll see Greece, for instance, has been at or above 100% GDP on its debt since 1994. That was a time when we were quote "drowning in oil" unquote. You'll also see how Ireland's debt went down significantly from 1992 to 2008.

So I do not draw a straight correlation = causation connection with GDP debt and the oil spike. It had to do with the contagion from the credit crisis and other just plain stupid (voluntary) moves of certain countries.
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Re: The end of ZIRP

Unread postby GoghGoner » Thu 17 Dec 2015, 17:50:09

Well, one day post ZIRP now. Nice 250 point drop in the Dow today. Will the Fed make it to the next step up or will they have to step back down before then? I say back down.

Fed will have to reverse gears fast if anything goes wrong

Yet zero rates and QE set off torrid credit bubbles in the emerging world, pushing up the global debt ratio by 30pc of GDP beyond their previous record in 2008. The Bank for International Settlements calls this a “Pareto sub-optimal” for the world as a whole. The chickens have not yet come home to roost.

Mrs Yellen has no margin for error as she tries to right the ship and slowly restore the US economy to a “Wicksellian” natural rate of interest, without detonating the debt-bomb in the process.

If she fails, the world is in trouble. We have never been in a predicament where a global recession began with rates already near zero. The Fed typically needs 350 basis points of monetary ammunition to fight a downturn.

The only way out then would be "helicopter money", a potent use of QE to fund fiscal spending directly and inject stimulus straight into the veins of the economy. But that is a saga for another day. She has not failed yet.
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Re: The end of ZIRP

Unread postby Tanada » Fri 18 Dec 2015, 04:30:20

Nothing lasts forever except true love lol, and that includes quarter point interest rates having a large impact.
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