ANZ New Zealand economists call for RBNZ quantitative easing 'in the ballpark of' $15 billion to $20 billion annually to soothe financial markets and ease bank funding costs

The expectation of future earnings is erased. It's gone. Poof. You can prop the "markets" up all you like, no investor is going to put money into a business without an expectation of future earnings. All this would do is prevent the economy from properly resetting, putting us into a Japanese style stasis as we've run out of future consumption that we can bring forward. My taxes will be used to create and keep alive zombie companies, and my wealth will be inflated away by your mad money printing. I don't consent.

And that has worked where?

I think if you really look at it, it has been the dependency on QE that has brought us to the current situation we are in now

I agree QE is needed when things are really bad such as the GFC, but they failed to turn the taps off afterwards and have skewed John Keynes theory of stimulating growth when there is none - the central banks caved to political pressure to keep markets rising for 11 years without a natural correction leading to a bubble in asset pricing

Now we have distortions in asset markets with Stocks, as well as typically 'safe haven' assets (Gold/ T-Notes) all falling at the same time, which is the opposite of what is considered traditional theory and what retirement saving and risk models are based upon

QE distorts free market pricing and traditional risk measures, and creates state dependencies - so I think we are not at the point where this is needed yet

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That's in the ballpark of $5000 per tax payer per year. To 'soothe' the bwankers aching butt.
Yet many people here in the comments section are absolutely OUTRAGED by the idea that the poorest kiwis would get $25 extra per week.
For comparison, the latter costs about $100 per tax payer per year.
Double standards much? Are you guys really this selfish? Or insane?

Unthinkable. Just absolutely, mindbogglingly preposterous.

NO NO NO!

The LAST thing we need to be doing is kicking this can down the road and socialising the costs. That hasn't worked for the past decade. Everyone involved needs to understand that capitalism of the variety we have demands depressions as a clean up mechanism and a way for governments to understand how to make the financial system more resilient LONG TERM, not just for the next couple of months.

Contra to the comments about 'soothing the bankers', I look at what bankers actually do:

• Supply working capital to e.g. exporters (who have to spend much money to accumulate inventory, months to years before it sells)
• Supply overdraft and short-term loan facilities to businesses who experience temporary cash-flow dips but are otherwise sound
• Supply FX purchase and sell facilities for businesses who deal with offshore suppliers and buyers

Now squeeze any of those, and who actually feels the pinch???

The ponzi scheme is collapsing. Invest now!

Mind boggling stupidity. EU has engaged in endless QE and negative rates and they have destroyed the bond market to the point that the ECB is the ONLY buyer. And this is what they propose? Unbelievable. I fear that this period of panic will be seized upon by govts everywhere to enact dictatorial powers and idiotic policies like this, which will ultimately lead to untold economic misery and hardship for hundreds of millions of people. The media/govt/central banks will have a lot to answer for when all this is over..

When we get to helicopter money and UBI I think we'll see a normalisation of our economy.

Incidentally I think government has to come to the party here to support consumers. We've had the business leg of this but now it's time to put cheques in the mail.

No

Wow, so ANZ are admitting they have no way though this and they want the government to print them a bailout. Just no! This will really test the government during election year.
(If the government is borrowing knowing it will be QE'ed this may as well be printing.)

Might start calling this virus the Black Swan (or BS)? Either way, its cause a massive shift in confidence, and confidence drives lending, and we have no confidence, so nobody is going to lend IMO. Are we ready for a 50-60% fall in NZ property prices this year?

"Please print $15b a year so the banking industry can keep sending $5b offshore in profit each year"

How about no.

A few days ago I thought we would see 30% to 50% house price collapse within the next three to six months. I am now starting to think that I have been too optimistic.

Now let me understand this correctly, and I note some (only) of the comment stream seem to get this, the banks (I do get that this is only one), after having lobbied and squeezed Governments to have less controls on them, and then essentially operated as if there is no downside anywhere, are now saying to the Government that they need to bail them out of a mess that they should have been cognizant of and factored into their business models?

My advice to the Government, any bailout should be to the people. ensure the banks cannot bugger off across the horizon taking their depositors funds with them. Make sure that first home buyers don't loose their shirts when the banks try to call in their loans, and for sound, well run business's don't let the banks screw them!

The four major banks have taken over a $billion each in profit in each of recent years. Where is that profit now? Time to put it back in!

This is the Big Reset.

I had no shares (other than pocket money in a Long Short fund) coming into this, and on Feb 24 thought I was well positioned and conservative in mainly cash and bonds ... but this bond rout will soon take this years bond gains.

To say gutted after years of pathetic returns to stay safe, would be a mild term.

As I've said over and over: this is the excesses made by central banking burning off, and they have made the entire investment market toxic (even my cash fund is day after day losing money, and every bank I'm in is slashing term deposit rates).

Unbelievable.

Easy answer - Nationalise the whole lot of them!
That's pretty much what is being suggested with this package, but the shareholders get to keep their equity.
Either: Let them go - survive on their own ( they won't or can't so that's not an available option - 'cutting our noses off to spite our faces' etc) or
Nationalise them

It's coming one day soon, anyway, so why prolong the agony and the cost?

(Oh, and for those who suggest "Governments can't run banks!'. Really?! Could the Government have done a worse job than the current crop of 'bankers'?!)

And here's a name for the new bank - a redundant one stripped from the carcass of one of the assumed entities - the National Bank of New Zealand!

Whatever help the government gives the banks this time around, the banks should be asked to give in return equity shares to the government, so governments can benefit by future dividend payments and also exercise some management control. Partial nationalisation or PPP, whatever. Fair dinkum ?

Did this after 2008 GFC ... Banks gave themselves huge bonuses and continued their irresponsible ways.. I say no QE ever.

Would it be a benefit to close down all share market trading for 3 -6 months, maybe longer? In the US they are at least looking at reducing hours of trading., and it has been closed down before. The next problem the government has is many people kiwi saver account will be decimated, and if companies fold, then will they recover? My kiwisaver is looking good, but mine is in a cashfund as I was using it for buying a home.

We think RBNZ QE in the ballpark of $15-20bn per annum will be needed to soothe the market and ease funding costs. This is consistent with the pace of QE seen in the US during QE3 post-GFC. If anything, more stimulus than this could be needed, given the simultaneous global fiscal blowouts that look to be in train

Unsecured credit spreads are widening because a bank such as ANZ is witnessing a collapse in it's share market value. This perception should in reality spread to the bank's customer deposits because they are no more than unsecured bank IOUs.

Forget about LSAPs, since the creation of inert, illiquid bank claims to RBNZ balance sheet reserves has proved to be worthless globally. Because: "There were two major evolutions in money and banking that seem to fall outside the orthodox narrative. The first was a shift of reserves and bank limitations from the liability side to the asset side. The second was the rise of interbank markets, ledger money, as a source of funding rather than required reserve balancing: replacing the old deposit/loan multiplier model". Courtesy of J. Snider from Alhambra

Firthermore,

A recent Bloomberg article described central bank easing with the phrase “pumping money into the economy.” That’s a misconception. Monetary easing is actually an asset swap. The public was holding savings in one form, and now it holds it in another. The Fed buys Treasury securities from the public, and replaces them with currency and bank reserves (base money) that someone has to hold, at every point in time, until the Fed sells its bonds and retires the cash. All monetary policy does is to change the mix of government obligations held by the public. Only fiscal policy – specifically deficit spending – changes the total amount of those obligations.

Historically, base money has earned zero interest. Forcing people to hold more zero-interest money makes them more eager to chase interest-bearing alternatives. That response made for a very pretty relationship between the ratio of base money / nominal GDP and the level of Treasury bill rates at any point in time. In recent years, the Fed created such a huge pile of zero-interest money that the only way it could raise interest rates, without slashing the size of that pile, was to explicitly pay interest on excess reserves (IOER).

Without IOER, short-term interest rates would only be about 12 basis points here because the Fed’s balance sheet (of Treasury bonds purchased from the public), and the corresponding pile of base money (held by the public instead) is still ridiculously large. If the Fed lowers interest rates today, it won’t be by “pumping money into the economy.” It will simply be by lowering the interest rate it pays on excess reserves. It may even create more reserves by buying more Treasury securities (QE), but again, even that is an asset swap.

Now, if you’re saving for retirement or some other purpose, the fact that you hold bank reserves rather than bonds doesn’t make you suddenly abandon your retirement plans. Nor does all of this unconventional money have much effect on spending in the economy. As I’ve shown before, the trajectory of real GDP growth during every U.S. economic recovery, regardless of the stance of monetary policy, is well described by simple mean-reversion where the “output gap” at the recession low gradually contracts at a rate of about 8% per quarter. It’s not monetary policy that gives you a recovery. It’s time and mean-reversion.

Even boosting the price of financial assets as a result of yield-seeking speculation doesn’t give you much of a wealth effect at all. In fact, except for the early part of an economic recovery or recession, where changes in the S&P 500 are generally just leading indicators of actual economic data (rather than driving economic changes), fluctuations in the S&P 500 have no correlation with subsequent economic activity at all. Economists have known from the time of Modigliani and Friedman that changes in the prices of volatile assets don’t materially affect people’s spending.

Tinkering with security valuations doesn’t create aggregate “wealth” – it simply takes future returns and embeds them into current prices. Long-term “wealth” is largely unchanged, because the actual wealth is in the future cash flows that will be delivered to investors over time, and once a security is issued, somebody has to hold it at every point in time until that security is retired. The only thing elevated investment valuations do is provide an opportunity for current holders to receive a transfer of wealth by selling out to some poor schlub who pays an excessive price for the privilege of holding the bag of low future returns over time.

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do we borrow a lot of euros?that is a steep fall.

Ha ha only yesterday I wrote about it, when high & profitable? the capitalist really discounted everybody else, by the time needs bail out? asking Govt/central bank/general tax payers to pay for the cost. Convenience eh?
This is how sneaky clever they're... those in upper echelon of ruling govt? to make such decision? no matter how you look at it? - their 'sub-conscious' bias already been 'bought'.. to join the Banks party..Sad, but easy to spot. This guest writer, clearly discounted of years profit under those Banks belt, their parents greed been exposed recently for world to see in OZ, now? this? annual? when came about regulatory came upon them? such as CAR, bank deposits guarantee,LVR etc vroom the whole leeches out an about resisting it, when about to be in red 'a little?' suddenly ask govt. help/tax payers bail out - C'mon, are we really that stupid? - for sure nothing we can do as they've bought those ruling elite with wealth enticement etc. - then their second, third, fourth, fifth ties governance echelon - But think again, how long they can play this? - Not even consider this little bug last Nov 1019 eh? - I guess so, my guess it will be the same when super large space object about hit this planet. In every adversity, strong leadership is needed at every upper echelon of decision makers - it is wrong to listen to those with vested/bias needs, whilst always presented themselves in the name of 'greater goods' or for 'whole country/it's citizen' etc. - Certain creatures in this planet was born fixed, not to be/cannot be changed - our job is to easily spot them. Remember analogical term; this is like a human body, play around to tweak this & that for certain body parts, listen to the boss (A/Hole)... before you knew it? we never recover from the real stage 4 metastasis cancer illness. By then, those sneaky posterior part.. already jumped ships. NZ wake up !

So if QE goes ahead, what's the advice for people holding cash? Buy assets?

from the UK star tabloid "crack down on the bog roll bandits"dont be shelf-ish

ANZ New Zealand economists call for RBNZ quantitative easing 'in the ballpark of' $15 billion to $20 billion annually to soothe financial markets and ease bank funding costs.................MAYBE................to give more loan to speculators so that housing ponzi continue.....................

It's the proles money! Give it to the people! Use vouchers if you dont trust the people but cut out the f'n middleman and go direct. Let's try trickle up for a change. That's how it happens anyway. Nationalize failed banks they are the problem not the solution.

This is central banks around the world coordinating a global takeover. Last week in nz a law was passed allowing govt to force you to sell your home or business.

Today Trump signed the defense production act..effectively the same legislation. Central banks will bail out everyone and buy and own everything. We will be slaves..

Hell no. Let the bubble deflate.