search.noResults

search.searching

dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
MONETARY POLICIES 22% from its late-summer high.


Worse, defaults on consumer loans were rising. December 2018 was the first time in two years that all loan types and all major metropolitan statistical areas showed a higher default rate month-over-month. Consumer debt – including auto, student and credit card debt – is typically bundled and sold as asset-backed securities similar to the risky mortgage-backed securities


that brought


down the market in 2008 aſter the Fed had progressively


raised


interest rates. Chairman


Powell


evidently got the memo. In January, he abruptly changed course and announced that QT would be halted if needed. On February 4th, Mary Daly, president of the Federal Reserve Bank of San Francisco, said they were considering going much further. “You could imagine executing policy with your interest rate as your primary tool and the balance sheet as a secondary tool, one that you would use more readily,” she said. QE and QT would no longer be emergency measures but would be routine tools for managing the money supply. In a February 13th article on Seeking Alpha titled “Quantitative Easing on Demand,” Mark Grant wrote:


The Fed is realizing that it cannot bring its balance sheet back to “normal.” It must keep pumping new money into the banking system to avoid a recession


Te Fed is realizing that it cannot bring


its balance sheet back to


“If the Fed does decide to pursue this strategy it will be a wholesale change


“normal.” It must keep pumping new money into the banking system to avoid a recession. Tis naturally alarms Fed watchers worried about hyperinflation. But QE needs not create unwanted inflation if directed properly. Te money spigots just need to be aimed at the debtors rather than the creditor banks. In fact regular injections of new money directly into the economy may be just what economy needs to escape the boom and


the


in the way the financial system in the United States operates and I think that very few institutions or people appreciate what is taking place or what it will mean to the markets, all of the markets.”


Te Problem of Debt Deflation


FX


bust cycle that has characterized it for two centuries. Mark Grant concluded his article by quoting Abraham Lincoln:


“Te Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”


Te quote is apparently apocryphal, but the principle still holds: new money needs to be regularly added to the money supply to avoid an overwhelming debt burden and allow the its


economy to reach true


productive


potential. Regular injections of new money are necessary to avoid something economists


fear even more than inflation – the sort of “debt deflation” that took down the economy in the 1930s.


Most money today is created by banks when they make loans. When overextended borrowers pay down old loans without taking out new ones, the money supply “deflates” or shrinks. Demand shrinks with it, and businesses lacking customers close their doors, in the sort of self- feeding death spiral seen in the Great Depression.


FX TRADER MAGAZINE April - June 2019 25


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61