02/06/2015 - The Unintended Consequences Resulting from Financial Repression
Scotiabank’s Guy Haselmann does not see much effectiveness on the recent announcement by the euro zone on its quantitative easing (QE) program .. emphasizes the demand for mone to invest in the real economy is not high when unusually low rates are lowered even more, especially where is a lot debt in the system already – “The plummeting velocity of money is a symptom of extreme indebtedness. Imposing a negative yield of 0.20% on the excess reserves of EU banks is a tax intended to boost lending, but there are many consequences to imposing such financial repression with little evidence that the intended goal will come to fruition.” .. thinks the Federal Reserve has boxed itself into a corner as it prepares the markets for a rate hike around the June timeframe – “If it does not raise rates in June, or thereabouts, then it must have an exceptionally good reason. The reason would have to be a significant and material deterioration in the economy or a highly troubling worsening of the geopolitical environment. Regardless, risk assets are likely to suffer mightily in the near future under either scenario.” .. emphasizes the financial markets are on “the verge of learning just how damaging the unintended consequences will be from multiple years of extreme central bank promises now that the Fed has run out of the ammunition to keep the utopian market façade alive.”
