samchain/econo-pairs-v1 huggingface dataset:
Richard W Fisher: R.I.P. QE3 ... or will it? Remarks (with reference to Shakespeare, Betsy Duke, Janet Yellen, Yogi Berra and Lenny Kravitz) by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, before the Shadow Open Market Committee Manhattan Institute, New York City, 3 November 2014. *  *  *  The views expressed by the author do not necessarily reflect official positions of the Federal Reserve System. Thank you, Mickey [Levy], for that colorful introduction. Unless you have been living under a rock (and no one in this audience looks like a cave dweller), you know that on Wednesday of last week, the Federal Reserve’s Federal Open Market Committee (FOMC) ended its program of purchasing Treasury bonds and mortgagebacked securities (MBS). Thus endeth QE3. May it rest in peace. Effects and efficacy of QE3 Under QE3, the FOMC directed the New York Fed’s trading desk to purchase a total of $ trillion in longer-term Treasuries and mortgage-backed securities, on top of the $ trillion invested in the first two rounds of quantitative easing. When we started the first tranche of asset purchases in late 2008, our balance sheet had footings of around $ billion; as the third and final round of quantitative easing ends, our balance sheet has reached $ trillion. The initial impetus for MBS purchases was a wide gap between MBS and Treasury yields, symptomatic of a dysfunctional mortgage-finance market.

If you want to bag a mallard, you don’t aim where the bird is at present, you aim ahead of its flight pattern. To me, the flight pattern of the economy is clearly toward increasing employment and inflation that is approaching our 2-percent target. Thus, I was encouraged by the wording we negotiated at the last FOMC meeting. I was pleased that we dropped the reference to “significant” in describing the remaining labormarket slack and that wording was included indicating we might well move to raise rates BIS central bankers’ speeches  3  sooner than thus far assumed, should the economy proceed along the trajectory I think we are on. To me, this neutered the adjective “considerable” in stating the time frame under which we might act. This is why this particular hawk voted “yes” in support of the statement we released on Wednesday. Now to the exit... Of course, I am concerned with what will happen to all the liquidity that remains in the system in the aftermath of our QE programs. The depository institutions we transact with have put back to the 12 Federal Reserve Banks some $ trillion in excess reserves. “Excess” means they cannot find better uses for that money than earning the 25 basis points (25/100ths of one percent per annum) we pay them until they can find creditworthy borrowers to lend to at significant multiples of that amount.
At the same time, we must ensure that banks, especially the larger ones, go back to their core business of extending credit to the real economy and refrain from engaging in the kind of risk-taking that gave rise to the recent crisis. Priority must, therefore, be given to the one measure that is most likely to influence the banks’ ability to take risk, that is the BCBS proposals on bank capital. Capital buffers must henceforth be commensurate with the degree of risk undertaken. It is no longer acceptable that profits are privatised and losses socialised. In a broader context, another important challenge is to ensure that systemic risks are addressed without unduly constraining financial innovation and integration. Finally, the opportunity provided by the current period of reflection should also be used to examine the possible consequences of some of the reform proposals for the functioning of financial markets and for the implementation of monetary policy, and by extension also for the real economy. References 1. European Central Bank, The Incentive Structure Of The “Originate And Distribute” Model, 2008. 2. Francis Boyer Lecture of The American Enterprise Institute for Public Policy Research, “The Challenge of Central Banking in a Democratic Society”, 1996. 3.  http://www.reuters.com/article/idUSN0132320120071003  4. The High-Level Group on Financial Supervision in the EU, 2009. BIS Review 67/2010  3  5. Basel Committee on Banking Supervision, “Strengthening the resilience of the banking sector”, 2009. 6. Basel Committee on Banking Supervision, “International framework for liquidity risk measurement, standards and monitoring”, 2009. 7.

Financial Stability Board “Progress since the St. Andrews meeting in Implementing the G20 Recommendations for Strengthening Financial Stability”, 19 April 2010. 18. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies. OJ, l 302, 17.11.2009, p. 1. 19. Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority. Brussels, 23.09.2009, COM(2009)503 Final. 4  BIS Review 67/2010
At this point, I believe that we are doing everything possible to limit the possibility that Y2K disruptions will have systemic consequences in our markets. However, we must all continue to work hard -- both individually and cooperatively -- in the time that remains to ensure that this threat does not become more concrete. In that spirit, Mr. Chairman, I would like to end my remarks by commending the Committee for organizing these hearings on the implications of the Year 2000 computer problem for international banking and finance. BIS Review 56/1998

But the policy measures were successful in turning the situation around: the exchange rate stabilised in 2009, fiscal consolidation progressed from 2010 onwards, growth resumed in the second half of 2010, the sovereign regained foreign capital market access in summer 2011, and the new banks were profitable and well capitalised. On the other hand, private sector debt restructuring has proven more time-consuming than originally hoped, and lifting the capital controls is a challenging task. According to the latest figures, Iceland’s growth rate is 4.5% and the unemployment rate has fallen to the 5½–6% range. What lessons can be drawn from this story? 1. Excessive and volatile capital flows played an important role in Iceland’s crisis, and the capital controls and the underlying balance of payments problem are a legacy of that. 2. To a significant degree, the euro area crisis is also a capital flow – balance of payments problem. 3. The framework for cross-border banking in the EU is deeply flawed. Either there will be a regression of financial globalisation at the EU level, or the freedoms must be matched by public frameworks and policies. 4. In the absence of international or EU-wide reforms, small, open economies like Iceland might have to take action to protect themselves, such as restricting the international activities of home banks and placing much more stringent prudential limits on foreign currency maturity mismatches and foreign currency lending. 5. An independent flexible currency is a double-edged sword.
What we need is to integrate the legal and institutional systems in parallel with the EU banks. With the introduction of the Euro there would arise a number of technical issues which must be immediately tackled. As of today, Turkish banks are allowed to maintain foreign exchange positions in 23 foreign currencies, of which 17, including the ECU, are European currencies. With the Euro the CB and the Turkish banks will no longer have to deal in these currencies, but only in Euro. Of course, initially there will be some currencies, like the British pound and a few others, which will continue to exist for a while. But within this process, all foreign assets and liabilities in the currencies of the countries participating in the monetary union will need to be converted into the Euro. Currently, Turkey follows an exchange rate policy based on a basket consisting of the US dollar and the Deutsche Mark. It is assumed that since other European currencies are related to the Deutsche Mark through the European Exchange Rate Mechanism (ERM), the basket also reflects the weight of other European currencies through the Deutsche Mark. With monetary union the share of the Euro area in Turkey’s overall trade in goods or services will be more than 50%. But this will not change the picture from the exchange rate policy point of view. Therefore the Euro could easily be substitute for Deutsche Mark in the present basket.

The sheer size of the economy in the monetary union will encourage the use of the Euro instead of the US dollar in trade and foreign exchange transactions. This process would further be accelerated by the fact that the use of a single currency will remove the not negligible cost of transactions. According to a study conducted by the IFO Institute in Munich, “the transaction costs for the inter-European currency management may be in the order of nearly 60 billion ECUs, or nearly 1% the GNP of the European Union”. Also it is likely that central banks will use the Euro rather than the US dollar in foreign exchange interventions. In turn, this will encourage non-EU central banks to switch an increasing proportion of their reserves into the Euro. This process will take time and the Euro will not usurp the role of the US dollar in the short term. However, the trend is likely to be persistent and eventually the current importance of the US dollar in the foreign exchange markets should be replaced by the joint importance of the US dollar and the Euro. One factor which will affect the speed of this change is the outlook for the Euro based on the fundamentals of the monetary policy of the European Central Bank (ECB). Moreover, the creation of a monetary union will prevent exchange rate volatility within the united Europe, the reason being that the Euro area as a whole will be much less dependent on foreign trade.
Despite the trauma of the global financial crisis last year, there have been no signs of an overall slowdown. According to the US Federal Reserve Board, the notional value of derivatives contracts outstanding at US commercial banks, the leading players in global derivatives markets, grew by more than 30% last year: this is the most rapid annual growth since 1994. The sheer volume of derivatives trading does not say much about their associated risks. These new financial instruments have undeniably helped investors to unbundle their risks. They have promoted investments and generated substantial benefits to the developing countries receiving such investments. However, the availability of derivative instruments has also increased the opportunities for speculation that resulted in significant losses with the downturn in markets during the financial crisis. 3  BIS Review 47/1999  The use of swaps, futures, forwards, and other derivative instruments have enabled investors to take on far greater exposure relative to their capital, and to greatly increase the potential for loss. Market Stability and Highly Leveraged Institutions Let me make it clear that the losses or gains by large financial market participants should not be a concern to regulatory authorities. Nor should the positions taken by individual market participants normally be of any concern. Speculators or investors, in essence, buy low/sell high or sell high/buy low, thereby providing liquidity to markets. However, there are two situations in which the very large positions taken by highly leveraged institutions are of particular concern to regulators.

Mr Yam discusses financial stability, region and international co-operation Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, at the 32nd Asian Development Bank annual meeting, in Manila, the Philippines, on 2 May 1999. Introduction I am delighted and honoured to have the opportunity to speak to this distinguished international audience. The theme of the forum is regional monetary and financial co-operation. From the point of view of time, venue, sponsors, and participants, it would, I think, be very hard to come up with a more appropriate topic than this. In terms of timing, our region is currently, we hope, moving through the final stages of a period of financial and economic dislocation that has taught us a number of lessons. The most important of these lessons, in my view, and one consistent with the aims of this forum, is that we need to intensify international and regional co-operation to reduce the risk of such crises occurring again. The venue for this forum, Manila, is one of the oldest international financial centres in Asia: it has also been the starting point for a number of important modern regional initiatives. Manila has given its name to the recently established Manila Framework, within which central banks and finance ministries in the region meet to promote regional co-operation on financial matters. The beginnings of systematic economic co-operation can also be traced to Manila, with the establishment here, in 1966, of the Asian Development Bank (ADB).
With the foundations now in place, on 2 June 2008 the Council announced the formation of the SME Central Coordinating Agency to further build on the successes that have been achieved and to take the SME sector to the next stage of development. This dedicated SME Agency represents a major structural enhancement in the SME development agenda and marks another milestone for SME development in Malaysia. The Small and Medium Industries Development Corporation or SMIDEC, will be transformed and repositioned to undertake this role. This new entity, that will be known as the SME Corporation Malaysia or SME Corp, will be a one-stop agency that undertakes the overall coordination of SME policy formulation and assessment of the SME development programmes. The SME Corp will serve as the central point of information, reference and advisory services for SMEs for all sectors and will assume the role of Secretariat to the Council, a role which has until now been undertaken by Bank Negara Malaysia. Increasing SME access to financing Bank Negara Malaysia's own efforts have been focused on ensuring that SMEs, at different stages of the business life cycle, have adequate access to financing. The initiatives have been directed at four broad areas. Firstly, the strengthening of financial service providers. This has involved strengthening the role of the banking institutions in providing financing to SMEs. This recent five years have seen the financial institutions accord greater focus to the SME sector.

And finally, the further measures that need to be implemented by the banking institutions and the SMEs in a more challenging environment of rising costs. Economic and financial developments Going forward, the international economic and financial environment is expected to remain challenging with slower global growth and continued uncertainties in the international financial markets. The moderation in global growth is also occurring in an environment of increasing inflation arising from the higher energy and commodity prices. The Malaysian economy has been on a steady growth path averaging about 6% in the recent three years. In 2007, the economy expanded by 6.3% and has continued to register a strong growth in the first half of 2008. This stronger growth has been achieved despite the more challenging external environment and increased uncertainties in the international financial markets. One of the important contributing factors has been the successful transformation of the Malaysian economy in this recent decade which has resulted in a more balanced and diversified growth, in which the services and agriculture sectors have become increasingly more important drivers of growth. In addition, domestic demand has a more significant role in driving the growth. The stronger domestic demand and growth in the services and agriculture sectors have benefited the SME sector since the majority of the SMEs are operating in these sectors. However, the rising international prices of energy and commodities have confronted economies globally with rising costs and intensifying inflationary pressures.
11 New FINMA-regulated participants establishing themselves in retail payments could also seek access to the SIC system in the future. As these examples show, the SIC system is moving with the times. SIC is systemically important and critical to the fulfilment of our mandate; we therefore support innovations which will improve its efficiency without compromising its safety. Conclusion Ladies and gentlemen, financial technology is evolving rapidly and calling many existing structures into question. Despite this, it is important to bear in mind that the fundamental needs of companies and households that are met by financial services remain largely unchanged. The usefulness and success of new technologies will hinge on whether they can meet these basic needs more cheaply, more securely and in a more customer-friendly manner than existing solutions. The SNB is neutral vis-à-vis the technologies underpinning financial market infrastructures. It assesses innovations in terms of their implications for the fulfilment of its statutory mandate. Our focus is on safety and efficiency, and we analyse the effects – and side-effects – of innovations closely through this lens. For this analysis, dialogue between market participants, regulators and central banks is essential. This is especially true in view of current technological changes, which make walking the line between stability and innovation particularly challenging. This exchange of views with practitioners helps us to correctly assess the uses and risks of new technologies. Such discussions are critical if we are to exploit the technologies of the future at the right time and under the right conditions.

I would therefore like to extend my sincere thanks to the organisers of the Sibos event for this excellent opportunity to share ideas. As home to many international organisations, Geneva is an ideal location for this dialogue. We are certain to find fertile ground here. I wish you all a successful conference with many enlightening discussions. 11  Cf. FINMA press release ‘FINMA reduces obstacles to FinTech’, 17 March 2016. Page 6/6
Today, this kind of dominance is manifested through the inability or unwillingness of fiscal authorities to control long-run expenditure/GDP ratio. BIS central bankers’ speeches  3  The recent period has outlined a different form of dominance: financial dominance, defined as the inability or unwillingness of the financial sector to absorb its losses. The presence of financial dominance constrains the manoeuvre room of both fiscal and monetary policies, due to the fact that fiscal authorities and/or central banks have to bail-out the financial sector. As pointed out by Benoît Cœuré (2015), for monetary policy, the problem stems mostly from inadequate supervision, at both micro-level (if supervisors show too much forbearance to under-capitalised banks, they can end up effectively shifting the burden onto monetary policy) and at macro-level (if supervisory policies allow banks to grow too rapidly, and then deleverage too slowly, it can also push the central bank into doing more), which can turn out in the ineffectiveness of monetary policy transmission mechanism. Let me say a few words about the issues of central bank independence in the context of required cooperation with the government in the post-crisis world. As we all know, from a historical perspective the prevalence of central bank independence is a relatively new institutional development, seen as a solution to the problem of time inconsistency of monetary policy and the stagflation of the ’70s. Is the post-crisis reality likely to dissolve the consensus about central bank independence?

If the importance of macro-prudential instruments was revealed by the global crisis and the forex interventions of central banks went back in fashion during the same period, there is a fact well known from the conventional economic wisdom, but highlighted once again by the crisis: the countercyclical stance of both monetary and fiscal policies is essential for ensuring a smooth trajectory of the economy. We all saw how unsustainable public finances and high levels of debt have impeded the effectiveness of a stability-oriented monetary policy. This was also the case of Romania, where the fiscal impulse was positive during the period of rapid growth before the financial crisis, contributing to the overheating of the economy and fuelling the imbalances accumulated in the economy. Moreover, the pro-cyclicality of the fiscal policy during the pre-crisis period exhausted the fiscal space needed to stimulate the economy in recession, leading to the need to reduce the budget deficit during the crisis (primarily due to financing constraints) and to perpetuating the pro-cyclicality of fiscal policy. As stated by Fritz Zurbrügg (2012), successful monetary policy is predicated on healthy fiscal policy, and vice versa, and to achieve stability and prosperity in the long term, fiscal and monetary policies must both focus on sustainability. In the past, the high fiscal deficit has resulted in the fiscal dominance of monetary policy with its inevitable monetisation of the government debt, but nowadays most central banks no longer directly finance government expenditure.