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@frances_coppola @azizonomics @tomashirstmoney Retirement Plan Death Spiral. Lack earnings on savings offset by savers reducing consumption
— Richard Field (@tyillc) May 23, 2013
@tyillc @azizonomics @tomashirstmoney certainly part of it. Repressing returns on savings perversely encourages ppl to save more, not less
— Frances Coppola (@Frances_Coppola) May 23, 2013
@azizonomics @frances_coppola @tomashirstmoney deflation expectations leads to extra risk aversion towars debt. hence credit growth slows
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney But are there deflation expectations with QE? I thought it was supposed to raise inflation...
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney without a price raising mechanism in the real economy, it creates only asset inflation
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney but that doesn't necessarily cause deflation
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @rf_hfc @tomashirstmoney If enacting a policy to fight deflation, possible to raise expectations of it...
— John Aziz (@azizonomics) May 23, 2013
@frances_coppola @rf_hfc @tomashirstmoneyIf CB enacts some QE, it signals the CB is expecting deflation...
— John Aziz (@azizonomics) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney plus, lower interest rates raises the propensity to save. pension premiums etc rise
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @frances_coppola @azizonomics @tomashirstmoney in summary, what is the effect of QE in an ageing society?
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney so rate repression discourages people who could spend from doing so. Could be seriously contractionary
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoneyit probably is in ageing societies with a capital based pension system
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney OK, so in Japan - where pensions are entirely private - low rates and QE are deflationary. +
— Frances Coppola (@Frances_Coppola) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney but low returns on savings are not just due to QE.
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney true, just a contributing factor. we need QE for the people. directly into checking account.
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney But in UK 60% of people don't have private pensions. Deflationary effect of low rates must be less?
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney effect should be smaller acc to theory
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney but QE does not depress returns to pension fund savers, only to ppl RECEIVING pensions.....
— Frances Coppola (@Frances_Coppola) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney because QE supports asset prices at expense of yield, what savers lose in yield they gain on price.
— Frances Coppola (@Frances_Coppola) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney so if ppl save more it is because they BELIEVE QE depresses returns, not because it actually does
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney no also to savers. call any insurer and get a quote on an annuity, now more expensive.
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney that is due to low rates, not QE.
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney qe's goal is to lower rates now right? liquidity no longer an issue?
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney QE depresses rates, but also raises asset prices. Low bank rates main problem for savers I'd say
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney conversionto annuity must use current riskfree rate, price gains do not fully compensate
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney no, price gains must compensate fully. Yield is a function of price.
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney there's a duration difference between assets you have and the annuity you need
— Robin Fransman (@RF_HFC) May 23, 2013
@rf_hfc @azizonomics @tomashirstmoney Obviously. But that is only affected by QE if portfolio rebalanced towards shorter maturities.
— Frances Coppola (@Frances_Coppola) May 23, 2013
@frances_coppola @azizonomics @tomashirstmoney your right for people who are very close to retirement. not for those still saving
— Robin Fransman (@RF_HFC) May 23, 2013
@frances_coppola @azizonomics @rf_hfc @tomashirstmoney QE supports asset prices but not enough for M2M of liabilities of pensions
— Calculo Ergo Sum (@CalculoErgoZum) May 24, 2013
