from a primary dealer

Preface. I generally subscribe to the view that in free currencies, deficits are mostly self-funding, and ‘enormous’ deficits needn’t be accompanied by higher yields. Government builds a bridge, pays the bridgebuilder, who pays the grocer, who eventually either buys the Treasury or deposits in a bank whose reserves are fungible vs T-bills via the intermediating Fed. Government dissavings and private sector savings are equal and offsetting, as long as the Central Bank has a working spreadsheet and an interest rate target. Yields are just a function of duration needs of savers vs borrowers, but the AMOUNTS always match up. Likewise, I don’t believe that the creation of bank reserves is inflationary or hyper-inflationary; bank lending is capital – not reserve – constrained. Loan officers don’t check the vaults. There is always enough. I continue to marvel at the armies of deficit vigilantes who take aim at Treasuries and JGBs, armed with Gold Standard thinking or even the latest Reinhart/Rogoff, only to retreat 2-3 year later. It didn’t work shorting US Treasuries in 2009-2010 for the ‘money supply’ or ‘deficit spike,’ and that roadside is stacked with corpses. Even the Home Run deficit vigilante hitters who nailed Europe this year (and Europe is, for now, operating as a quasi-Gold standard and an entirely different set of risks) offset those gains with losses betting the other way on the US, UK, and Japan. It’s evident in the returns.

DJ Greece, Creditors’ Deal Would Have Average 4%-4.2% Coupon On New Bonds

Wonder if the ‘New Bonds’ are Mosler bonds?

*DJ Greece, Creditors Close To Agreeing Step-Up Coupon Of Around 3.5%-4.6% -Source
*DJ Greece, Creditors’ Deal Would Have Average 4%-4.2% Coupon On New Bonds -Source
*DJ Greek Creditors’ Real Writedown Seen At 65%-70% Under Deal Terms -Source
*DJ Final Details On Greek Coupon Deal Still Under Discussion, May Change
*DJ Greece Creditors Deal Could Have Grace Period Of About 10 Yrs On Principal

IMF staff on Japan

For another example of really bad analysis from the IMF (2011), see:

“ Raising the Consumption Tax in Japan: Why, When, How?”
http://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf

Some quotes from the summary:
“ [IMF] Staff analysis reported here suggests that a gradual increase in the consumption tax [in Japan] dfrom 5 percent to 15 percent over several years—a level that is still modest by OECD standards—could provide roughly half of the fiscal adjustment needed to put the public debt ratio on a downward path within the next several year.”

“Experiences elsewhere, as well as the specific circumstances of Japan, suggest that the strategy for raising the consumption tax be guided by the “four Ss”—it should start Sooner rather than later, be raised by Stepwise increases, Sustained for some time, and retain the very Simple current structure of the consumption tax: [….]”

“Japan’s experience in raising the consumption tax will set an important example for other countries.”

My comments: (1) The IMF staff has not learnt anything from Japan’s own experience in raising tax rates of later 1990s and early 2000s. (2) Start sooner = in the middle of a recession!

Tanweer Akram

Sweden Should Sell More Bonds to Tap Foreign Demand, SEB Says

Total nonsense.
The do have their own currency, last I checked.

Sweden Should Sell More Bonds to Tap Foreign Demand, SEB Says

Jan 19 (Bloomberg) — Sweden should borrow more to take advantage of demand and increase investments in the largest Nordic economy, SEB AB Chief Economist Robert Bergqvist said.

The Nordic region has emerged as a haven as European leaders struggle to contain a sovereign debt crisis now in its third year. Swedish 10-year bonds are trading at a yield of 14 basis points less than benchmark German debt as of 10:56 a.m. in Stockholm.

“If you look at other countries in Europe that now must save money, cut budget deficits and bring down government debt, in Sweden we can make investments for the future, so I hope the government is using this very nice situation to borrow money to make investments in infrastructure, education,” Bergqvist said in an Jan. 17 interview Stockholm. “This would strengthen the Swedish position in the long term.”

Some foreign investors are concerned about the level of liquidity in the market, he said. “They want to see more government debt.”

Chinese Agencies Working to Boost Consumption

More signs the western educated kids are taking charge.
Instead of the public sector spending more than it’s ‘income’
seems they are working on expanding private sector debt?
And tax cuts for institutional investors to buy equities?

Good luck to them…

Chinese Agencies Working on Fiscal Steps to Boost Consumption

Jan 18 (Bloomberg) — Commerce Ministry spokesman Shen Danyang says his agency, central bank and finance ministry are working on such steps

* China will support wider use of credit, bank cards

* Agencies will submit plan to State Council

* NOTE: State-run China Securities Journal today reported govt may introduce tax cuts, other preferential policies for institutional investors to encourage long-term stockholding

Azumi: Not Immune To Europe-Style Fiscal Crisis

And, unfortunately, they are acting accordingly, ensuring another lost decade and further destruction of their culture.

Azumi: Not Immune To Europe-Style Fiscal Crisis

By Kelly Olsen

Jan 18 (Dow Jones) — Finance Minister Jun Azumi said Wednesday that Japan is not immune to a euro-zone style fiscal crisis and that the government is “resolved” to raise the consumption tax to improve the nation’s finances.

Japan is “no exception,” Azumi said during a speech at the Foreign Correspondents’ Club of Japan, referring to the crisis in Europe in light of Japan’s own high debt levels.

Azumi said that although yields on Japanese government bonds are currently low, rates can quickly rise to “cause problems.”

“We cannot avert our eyes” from the problem of Japan’s outstanding debt, he said, which at around 200% of gross domestic product is the highest in the industrialized world.

Azumi said the government is resolved to raise the consumption tax rate to help bring the country’s finances under control, but acknowledged the difficulties in getting the legislation passed, saying it is “like climbing Mt. Everest.”

Prime Minister Yoshihiko Noda aims to submit legislation to double the tax to 10% by 2015 to a parliamentary session set to begin next week, though the unpopular move is opposed by opposition parties and has sparked defections from Noda’s ruling Democratic Party of Japan.

China PBOC Asks Banks to Refrain From Lending Too Much

China PBOC Asks Banks to Refrain From Lending Too Much

Jan. 13 (Bloomberg) — The People’s Bank of China’s regional branches asked banks to refrain from lending “too much” in early part of the year, Reuters reports today, citing unidentified people in the banking industry.

Shanghai PBOC branch told banks that 1Q new loans shouldn’t exceed 40% of total new loans last year, according to Reuters

Fed’s Bullard: Best To Leave Economic Stimulus To Fed

*DJ Fed’s Bullard: Best To Leave Economic Stimulus To Fed
*DJ Bullard: Fed Can Stimulate Even When Rates Are At Zero Percent
*DJ Bullard: Fed Potency Negates Need For Government Stimulus
*DJ Bullard: Monetary Policy Has Been Appropriate

That means he’s pleased with the outcome of the last three year’s policies???

He’s satisfied with current conditions???