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Generational Dynamics World View
*** 5-Aug-16 World View -- Bank of England uses 'sledgehammer' stimulus to fight Brexit slowdown

This morning's key headlines from GenerationalDynamics.com
  • Bank of England uses 'sledgehammer' stimulus to fight Brexit slowdown
  • China overtaking both Russia and US in influence in Central Asia

****
**** Bank of England uses 'sledgehammer' stimulus to fight Brexit slowdown
****


[Image: g160804b.jpg]
Mark Carney on Thursday

It was expected that on Thursday, the Bank of England's governor Mark
Carney would announce that the BoE would reduce interest rates from
the already low 0.5%, set in 2009 during the financial crisis, to an
even lower 0.25%.

Mark Carney, who is a Canadian is currently the Governor of the Bank
of England (BoE) did make that exact announcement, but he shocked
investors by announcing a lot more. He announced a massive program to
"print money" and use it for a quantitative easing program that would
purchase about 70 billion pounds ($100 billion) of bonds -- not only
government bonds but also corporate bonds.

As we described two days ago,

global interest rates have been rapidly plummeting since November of
last year, and the average is now at 0.5%, causing a great deal of
alarm among many financial experts. Carney said on Thursday that the
BoE has no plans to implement negative interest rates, which have been
increasingly common in countries around the world, but his
announcement nonetheless will push the average down even farther.

The announcements by Mark Carney, who is not a Honeymooner, have
received several forms of criticism. Some analysts point out that
quantitative easing and low or negative interest rates have been tried
around the world and haven't worked so far, although others claim that
these policies have allowed the world the recover from the financial
crisis. Another criticism is that by purchasing corporate bonds, the
BoE will be picking and choosing among companies, giving big
advantages to the companies whose bonds are purchased over the
companies whose bonds are not purchased. Others say that even if the
interest rate change was necessary at this time, the UK economy is in
good shape and does not need such a massive quantitative easing
purchase.

Carney admitted that he was using "a sledgehammer to crack a nut," and
he said that the successful Brexit referendum, which called for
Britain to leave the European Union, would cause the economy to slow
later this year, and so he was acting pre-emptively:

> [indent]<QUOTE>"We took these steps because the economic outlook has
> changed markedly. Indicators have all fallen sharply, in most
> cases to levels last seen in the financial crisis, and in some
> cases to all-time lows. ...
>
> By acting early and comprehensively, the (Bank) can reduce
> uncertainty, bolster confidence, blunt the slowdown and support
> the necessary adjustments in the UK economy."<END QUOTE>
[/indent]

Whether that's true remains to be seen. By announcing such a massive
easing program, investors may decide that the UK economy is in more
trouble than they realized, and they may actually lose confidence and
make things worse than they currently are.

In fact, Generational Dynamics predicts that exactly that will happen,
because the velocity of money keeps plummeting. As I explained in
"11-Mar-16 World View -- In desperation move, European Central Bank further lowers negative interest rates"
, the velocity of money is a generational
variable, and a falling velocity of money means that people are afraid
to spend money or to go into debt.

Carney's desperation announcement on Thursday also contained provision
to attempt to tackle the velocity of money problem, saying that the
0.25% interest rates should make it easy for banks to lend money to
people and businesses. He said that banks have "no excuse" not to
pass on the lower borrowing costs to customers and will be charged a
penalty if they fail to do so. That hasn't worked in Japan and
Europe, so don't be surprised if it doesn't work in Britain. BBC and Reuters and Bloomberg

****
**** China overtaking both Russia and US in influence in Central Asia
****


On Thursday, US Secretary of State John Kerry announced at a meeting
that the US will providing $15 million in aid five Central Asian
countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and
Uzbekistan. The purpose of the meeting was to discuss projects in the
fields of trade, transport, business climate, renewable energy
sources, the fight against terrorism, as well as the trafficking of
weapons, illicit drugs and people. This follows a similar meeting in
Uzbekistan in November 2015.

Russian officials fear that the US is trying with this announcement of
$15 million in aid to gain greater influence in Central Asia at
Russia's expense. The Central Asian countries were all part of the
Soviet Union before it disintegrated in 1991, so Russia considers
itself to be the prior influencer of these five nations, and considers
the US moves to be suspicious.

But in fact, Russia has much more to fear from China than from the US.

Kazakhstan may already be choosing China over Russia. Most of the
routes from China to Europe in China's "New Silk Road" or "One Belt
One Road" (OBOR) initiative pass through Kazakhstan, giving China
numerous opportunities for investments and influence. In fact,
Kazakhstan has already announced the "100 concrete steps" program that
incorporate Chinese investments and goals. This includes a railway
that crosses the entire territory of Kazakhstan and reaches Iran.

However, one result of China's increasing investments is generation of
Sinophobia among the general public. As we reported in May,
authorities in Kazakhstan have had to
react harshly to widespread demonstrations in cities across the
country protesting against "land reforms" that would permit large
Chinese agribusinesses to take control of vast swaths of farmland.

However, nowhere has the spread of Chinese influence been greater than
in Tajikistan. According to one local commentator,

> [indent]<QUOTE>"[China has] begun to extend its financial influence in
> various spheres of the [Tajikistani] economy, to buy up industries
> and to take control of agricultural land, [with the result that] we
> have become completely dependent on China [and] filled up by
> Chinese entrepreneurs."<END QUOTE>
[/indent]

It's thought that there are now 150,000 Chinese working in Tajikistan,
even though the government says that the total quotas for foreign
workers is only 8,000 a year.

As in Kazakhstan, the Chinese are taking control of huge amounts of
farmland in the countryside, where officials are renting an increasing
amount of land to Chinese farmers for 49-year terms. Furthermore,
when the Chinese hire Tajik laborers, they treat them as "second
class" people, and pay them less than they pay Chinese workers.
Sputnik News (Moscow) and Diplomat (6-Jul) and Jamestown

KEYS: Generational Dynamics, Bank of England, Mark Carney,
Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan.
Russia, China

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John J. Xenakis
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Messages In This Thread
RE: Generational Dynamics World View - by radind - 05-14-2016, 03:21 PM
RE: Generational Dynamics World View - by radind - 05-23-2016, 10:31 PM
5-Aug-16 World View -- Bank of England uses 'sledgehammer' stimulus to fight Brexit s - by John J. Xenakis - 08-04-2016, 09:33 PM
RE: Generational Dynamics World View - by radind - 08-11-2016, 08:59 PM
RE: Generational Dynamics World View - by SomeGuy - 01-18-2017, 09:23 PM
RE: Generational Dynamics World View - by tg63 - 02-04-2017, 10:08 AM
RE: Generational Dynamics World View - by Galen - 03-13-2017, 03:33 PM
RE: Generational Dynamics World View - by SomeGuy - 03-15-2017, 02:56 PM
RE: Generational Dynamics World View - by SomeGuy - 03-15-2017, 03:13 PM
RE: Generational Dynamics World View - by Galen - 05-30-2017, 01:04 AM
RE: Generational Dynamics World View - by Galen - 07-08-2017, 01:34 AM
RE: Generational Dynamics World View - by tg63 - 08-09-2017, 11:07 AM
RE: Generational Dynamics World View - by tg63 - 08-10-2017, 02:38 PM
RE: Generational Dynamics World View - by Galen - 10-25-2017, 03:07 PM
RE: Generational Dynamics World View - by rds - 10-31-2017, 03:35 PM
RE: Generational Dynamics World View - by rds - 10-31-2017, 06:33 PM
RE: Generational Dynamics World View - by noway2 - 11-20-2017, 04:31 PM
RE: Generational Dynamics World View - by Galen - 12-28-2017, 11:00 PM
RE: Generational Dynamics World View - by Galen - 12-31-2017, 11:14 PM
RE: Generational Dynamics World View - by JDG 66 - 06-22-2018, 02:54 PM
RE: Generational Dynamics World View - by JDG 66 - 07-11-2018, 01:42 PM
RE: Generational Dynamics World View - by JDG 66 - 07-11-2018, 01:54 PM
RE: Generational Dynamics World View - by JDG 66 - 07-19-2018, 12:43 PM
RE: Generational Dynamics World View - by JDG 66 - 07-25-2018, 02:18 PM
RE: Generational Dynamics World View - by JDG 66 - 07-11-2018, 01:58 PM
RE: Generational Dynamics World View - by Galen - 08-18-2018, 03:42 AM
RE: Generational Dynamics World View - by Galen - 08-19-2018, 04:39 AM
RE: Generational Dynamics World View - by tg63 - 09-25-2019, 11:12 AM
RE: Generational Dynamics World View - by JDG 66 - 03-09-2020, 02:11 PM
RE: Generational Dynamics World View - by Camz - 03-10-2020, 10:10 AM
RE: Generational Dynamics World View - by tg63 - 03-12-2020, 11:11 AM
RE: Generational Dynamics World View - by JDG 66 - 03-16-2020, 03:21 PM
RE: 58 year rule - by Tim Randal Walker - 04-01-2020, 11:17 AM
RE: 58 year rule - by John J. Xenakis - 04-02-2020, 12:25 PM
RE: Generational Dynamics World View - by Isoko - 05-04-2020, 02:51 PM
RE: Generational Dynamics World View - by tg63 - 01-04-2021, 12:13 PM
RE: Generational Dynamics World View - by CH86 - 01-05-2021, 11:17 PM
RE: Generational Dynamics World View - by mamabug - 01-10-2021, 06:16 PM
RE: Generational Dynamics World View - by mamabug - 01-11-2021, 09:06 PM
RE: Generational Dynamics World View - by mamabug - 01-12-2021, 02:53 AM
RE: Generational Dynamics World View - by mamabug - 01-13-2021, 03:58 PM
RE: Generational Dynamics World View - by mamabug - 01-13-2021, 04:16 PM
RE: Generational Dynamics World View - by mamabug - 01-15-2021, 03:36 PM
RE: Generational Dynamics World View - by galaxy - 08-19-2021, 03:03 AM
RE: Generational Dynamics World View - by galaxy - 08-21-2021, 01:41 PM
RE: Generational Dynamics World View - by galaxy - 02-27-2022, 06:06 PM
RE: Generational Dynamics World View - by galaxy - 02-27-2022, 10:42 PM
RE: Generational Dynamics World View - by galaxy - 02-28-2022, 12:26 AM
RE: Generational Dynamics World View - by galaxy - 02-28-2022, 04:08 PM

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