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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (53389)	7/14/2006 2:47:31 PM
From: YanivBA	Read Replies (1) \| Respond to of 116555

I actually asked my macro professor as to the how. He said (quoting from memory): "Nobody really understands how the central banks of the world operate. I remember a former student of mine that went to sit in when they (central bank of Israel) auctioned money, in the old days when they still had a place for that. He ended up arguing with the bank officials about what it was they where were actually doing. According to him they didn't understand it themselves. As for understanding what they are doing from the documents they publish. I may know someone that can help you, but I'll have to check that out …" As for the why, here is a quote of a quote that help explain the relationship between the current account, quantitative easing and asset prices: From: federalreserve.gov --------- When the Bank of Japan initiated quantitative monetary policy easing in March 2001, it expected portfolio-rebalancing effects to help spur the economy. But as stated by Governor Fukui (2003), the expected stimulus to the economy did not seem to materialize: …… one of the effects expected from the introduction of quantitative easing was the so-called "portfolio rebalancing effect." The Bank thought that, even when the marginal value of liquidity services became zero, people would start to rebalance their portfolios by investing in assets with higher marginal values whether these were real or financial assets, if the Bank increased further its provision of liquidity. The aim of this process was thus to generate positive economic momentum, acting, for example, to push up asset prices. So far, however, the effect has not been widely observed. (Fukui, 2003) -------- YanivBA