Koo: Why US Quantitative Easing “worked” better than other QEs

This is a guest post from Richard Koo, chief economist of the Nomura Research Institute and, amongst many other things, author of “The Holy Grail of Macroeconomics, Lessons from Japan’s Great Recession”, which lays out his balance sheet recession thesis in detail.

The post is an updated extract from his most recent note for Nomura and reproduced here, with his permission, for your arguing pleasure…

The US, the UK, Japan, and Europe all implemented quantitative easing (QE) policies, but the understanding of how those policies work apparently differs greatly from country to country, leading to very different outcomes. With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case. Read more

China, money supply and John Maynard Keynes

By Jennifer Hughes in Hong Kong

Last time China’s companies held this much money to hand, it presaged an investment boom and better growth. But no-one is predicting that this time round.

China’s M1, or its narrow money supply, jumped 24.6 per cent in June while M2, the broader measure, rose 11.8 per cent. The gap between the two is now at its highest since January 2010 – and it is rising sharply. Read more

Further reading

Elsewhere on Tuesday,

- China slowdown story has moved into a new phase as government props up ailing private sector?

- QE metaphor du jour: “So could it really be that, all along, central bankers have been treating us like slime mould?”

- The man who ghostwrote The Art of the Deal is having some regrets: “I put lipstick on a pig,” he said. “I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is.” He went on, “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

- The diary of a desperate mother trying to put food on a Venezuelan kitchen table.  Read more

FirstFT – West warns Turkey on crackdown, Trump’s ghostwriter tells all and the perils of full-time work

US and EU leaders warn Turkish president to use restraint against coup plotters Read more

I will build a great, great (note about Trump’s) wall

ICYMI, this might be the greatest note of the year so far*:

 Read more

SoftArm, and some “red flags”

From a Liberum SELL note on Arm published before Masayoshi Son’s SoftBank offered to buy the UK chip designer for just over £24bn:

 Read more

Herbalife: avoiding the p-word

Herbalife, the nutritional shake multi-level marketing enterprise involved in a three-year battle over the legitimacy of its business model, has agreed to change the way it does business as part of a settlement with the Federal Trade Commission announced Friday.

The Los Angeles-based group also agreed to pay $200m compensation to customers to settle a complaint that it, among other things, caused substantial injury to customers through an unfair compensation scheme in which the only true way to profit was through recruitment.

There was no mention of the term pyramid scheme, but keep in mind that a multi-level marketing enterprise is at heart nothing more then a product and a compensation scheme. Messy legalities about what makes one operation legitimate and the other illegitimate have shifted for the benefit of those exploited. Read more

Markets Live: Monday, 18th July, 2016

Live markets commentary from FT.com 

FT Opening Quote: Softbank bets on post-Brexit Britain

Softbank’s blockbuster offer for Arm Holdings, British Land’s wariness and Boris Johnson’s Brussels debut as foreign minister. FT Opening Quote, with commentary by Naomi Rovnick, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Ten per cent of respondents throw the word ‘never’ around quite casually…

 Read more

Further reading

Elsewhere on Monday,

- Gavyn Davies on Japan’s flirtation with helicopter money.

- The Herbalife Rorschach Test.

- McKay Coppins on how the world taunted Donald Trump into running.

- A critique of Jeremy Corbyn by his former shadow minister Thangam Debbonaire which is… not great tbh. Read more

FirstFT – Crackdown in Turkey, how to make Brexit manageable and the ideal diet for a positive mind

Response to failed coup moves to president’s inner circle Read more

Thought for the weekend

Doo doo, doo doo. Right. Good.

- David Cameron reflecting (via a hot mic) on his resignation as Prime Minister Read more

If Spain didn’t need capital controls, why would anyone?

Until relatively recently, academics and Western policymakers overwhelmingly supported the official position of the European Union. Nowadays we live in a world where the head of the International Monetary Fund — who also happens to be the former Finance and Economy Minister of France — publicly says the “inherent volatility” of cross-border capital movements is a problem. Read more

Liquidity regulations could help Fed policy transmission, or maybe just non-bank lenders

Obvious statement: Banks are crucial for the transmission of monetary policy into the US economy.

Not-so-obvious theory: Bank lending might become more important in that transmission because of post-crisis liquidity requirements. This one is interesting because it comes straight from the blog of the New York Fed, the guys in charge of US monetary policy implementation.

But if reserves do return to normal levels, that means even more credit risk could be pushed off of banks’ balance sheets. And that could leave an even bigger role for non-bank lenders and asset managers. Read more

Alphachat: Vox-pop from Camp Alphaville; “Overrated/Underrated” with Tyler Cowen; and the JPM pay bump

Alphachat is available on Acast, iTunes and Stitcher. Read more

There’s no Markets Live session on Friday

Bryce has taken a snap Summer Friday; Murphy’s deepening contact relationships in NW8. Normal service will resume on Monday. Read more

FT Opening Quote: Carney holds fire

BOE rates unchanged and European banks count the costs of Brexit. FT Opening Quote, with commentary by Lex Editor Robert Armstrong, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Friday,

- Aswath Damodaran: Tesla is a story stock, it’s just not clear what the story is.

- Cameron’s failure was austerity.

- Everything you need to know about Theresa May’s Brexit nightmare in five ten or so minutes. Read more

FirstFT – Terror attack on Nice, how the CIA hoodwinked Hollywood and an easy way to influence people

Attacker kills more than 70, injures 100 as truck ploughs into crowd celebrating Bastille day Read more

This is how Santander was treating its customers in the US

America’s Consumer Financial Protection Bureau has just fined Santander Bank $10m for “illegal overdraft practices”.

The headline number doesn’t suggest misbehaviour of an outrageous magnitude — not to readers used to seeing bank penalties in the billions — but the wrongdoing itself is… well judge for yourself: Read more

This Bundless world…

One of the little-remarked consequences of the Brexit vote in the UK is that the subsequent generalised tightening of sovereign yields across the eurozone means that even less euro-core government paper qualifies for Draghi’s QE programme. There are dangers in the ECB ignoring this looming problem. Here’s a cheat sheet on action that could be taken.

 Read more

Trouble in P2P paradise

This is a story of a startup going up against its most important investor and losing the fight. Each side has their version of events and the narrative is complicated by the various claims and counter-claims, but it’s a cautionary tale of how personal rivalries can almost ruin a business. Read more

The perpetual JGB cometh

And you may be able to blame Ben Bernanke for it (via Bloomberg): Read more

Markets Live: Thursday, 14th July, 2016

Live markets commentary from FT.com 

Brexit upsides, RMB devaluation edition

Upsides for whom, you ask?

For Chinese policymakers, we respond.

As do Deutsche Bank:

More subtly, Brexit indirectly helped reduce concerns of a ‘risk off’ shock from China thanks to the stealthy RMB devaluation around the UK vote. This has confirmed a new-found market tolerance of China currency slippage, at least when it looks controlled by policymakers.

 Read more

FT Opening Quote: Moneysupermarket under the microscope

The UK takes some retail solace, while Halford bemoans the rain. FT Opening Quote, with commentary by insurance correspondent Oliver Ralph, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Placing Ireland’s economic “recovery” in context

Being a corporate tax haven can do strange things to your national accounts.

Consider the Republic of Ireland, which just reported that its economy expanded by somewhere between 19 and 26 per cent in 2015, depending on whether you count the value of what’s produced in Ireland (gross domestic product) or the value of what’s produced by Irish citizens and companies domiciled in Ireland (gross national product). Read more

Further reading

Elsewhere on Thursday,

- Nicholas Shaxson: The great Trump tax mysteries.

- Facebook Live vs/ as journalism, a technical glitch.

- A referendum on taxes would have been just as sensible.

- Sometimes it’s hard for owners to talk to companies. Read more

FirstFT – Boris Johnson’s return, why Britain needs immigrants and the hidden messages in children’s movies

Theresa May pledges to make Britain ‘a country that works for everyone’ Read more