Traders work on the floor of the New York Stock Exchange.

Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 and may transform the relationship between the once fiercely-independent banks and governments.

As rich economies sink deeper into a slough of debt after yet another wave of euro financial and banking stress and US hiring hesitancy, everyone is looking back to the US Federal Reserve, European Central Bank, Bank of England and Bank of Japan to stabilise the situation once more.

What's for sure is that quantitative easing, whereby the "Big Four" central banks have for four years effectively created new money by expanding their balance sheets and buying mostly government bonds from their banks, is back on the agenda for all their upcoming policy meetings.

Government credit cards are all but maxed out and commercial banks' persistent instability, existential fears and reluctance to lend means the explosion of newly minted cash has yet to spark the broad money supply growth needed to generate more goods and services.

In other words, electronic money creation to date -- whether directly through bond buying in the United States or Britain or in a more oblique form of cheap long-term lending by the ECB -- is not even replacing what commercial banks are removing by shoring up their own balance sheets and winding down loan books.

Global investors appear convinced more QE is in the pipe.

"It is almost as if investors are saying QE will happen no matter what," said Bank of America Merrill Lynch's Gary Baker.

BoA Merrill's latest monthly survey of 260 fund managers showed nearly three in four expect the ECB to proceed with another liquidity operation by October. Almost half expected the Fed to return to the pumps over the same period.

The BoJ has already upped asset purchases yet again this year and Bank of England policy dove Adam Posen said on Monday the BoE should not only buy more government bonds but target small business loans too.

But aside from investor hopes of a market-based call and response, is there any evidence that QE actually helps the underlying problem and what are the risks from all this?

The "counterfactual", to use an economics wonk's term, is the most powerful argument in QE's favour -- what would have happened if they didn't print at all and broad money supply collapsed?

But after four years in which, according to HSBC, the balance sheets of the Big Four have collectively more than tripled to $9 trillion and still not generated self-sustaining recoveries, the question is how long this can keep going on without creating bigger problems for the future.

For a start, there is no quick solution to the problem of mountainous indebtedness.

Recapitalizing banks; stabilising housing and mortgage markets responsible for deteriorating loan quality; further deep integration of euro fiscal links to support the shared currency; and capping government debt piles in the United States, Japan and Britain will -- even for optimists -- take many years.

On top of that the rich economies face gale force headwinds over the next decade from ageing and retiring populations.

In the interim, the job of central banks looks increasingly like a blended mix of monetary policy and sovereign debt management. And that's on top of recently acquired roles as guardians of financial and banking system stability.

The concern is that monetary authorities are increasingly acting as government agents responsible as much for stabilising bond markets and keeping banks clean as for fighting inflation.

The question is not whether central banks can withdraw this money again once broad money growth gains traction -- most think that's mechanically easy -- it's whether they will be able to resist pressure to carry on underwriting government deficits.

A series of papers prepared for a Bank for International Settlements workshop in May certainly saw the problem.

"Whatever view is taken of this, the boundary between monetary policy and government debt management has become increasingly blurred. Policy interactions have changed in ways that are difficult to understand," the BIS overview concluded.

The papers also made clear that this form of monetary policy has plenty of precedents throughout the earlier part of the 20th century during the gold standard. It's only since the 1980s and 1990s that consensus shifted squarely behind the idea of highly independent central banks pursuing narrow price stability and even strict inflation targets.

And given the level of credit chaos that ultimately emanated from the so-called Great Moderation, it's possible that history will see that system as the aberration rather than norm.

HSBC economists Karen Ward and Simon Wells reckon central bank independence is the biggest impact from ever-more QE and fear that, as in Japan, the price will be paid by persistently high if sustainable government deficits that stifle growth.

"The heyday of independent central banking could be drawing to a close," they wrote in a wide-ranging report on QE.

Hedge fund manager Stephen Jen said he thinks the temporary benefits of QE are outweighed by long-term costs such as removing pressure for fiscal reform and market volatility.

"At some point, the benefit-cost balance flips."

Then again, not everyone bemoans the greater responsiveness of central banks to the will of elected governments.

“The source of central bank independence is public support from elected officials that the central bank is pursuing desirable social goals,” BoE's Posen said Monday.

The Daily Star/Bangladesh/ 14th June 2012

Jamie Dimon, president and CEO of JP Morgan, drinks water as he testifies before a Senate Banking Committee hearing on Capitol Hill yesterday in Washington, DC.

Jpmorgan Chase & Co blames its $2 billion, and maybe much larger, trading loss on mistakes made in hedging the market. Bill Black, a finance criminologist, calls this “hedginess.”

“Hedginess” riffs on “truthiness,” the word the comedian Stephen Colbert invented in 2005. Truthiness means favouring versions of events that one wishes to be true, and acting as if they were true, while ignoring facts to the contrary that are staring you in the face. Fake hedges are to real hedges as “truthiness” is to truth. Hence “hedginess.” JPMorgan's trades got around the Volcker rule, which tries to prevent banks from speculating in financial derivatives, by labelling as “hedges” bets that were clearly not hedges.

As Black puts it, JPMorgan is now defining as a hedge “something that performs in exactly the opposite fashion of a hedge.” A hedge is supposed to reduce risk, but according to Black, the losses came from deals that “dramatically increased risk by placing a second bet in the same direction, which compounded the risk.”

Actually, it isn't quite as simple as Black says. While JPMorgan did not respond to my questions on its strategy, Reuters and others have reported that the trade began as a standard hedge. Subsequently, the reports say, it morphed into speculation as the bank layered bet on top of bet.

Such doubling down is why Black says JPMorgan indulged in hedginess.

Who is Black to pronounce on such things? As a senior regulator at the Federal Savings and Loan Insurance Corp, he, more than anyone else, was responsible for the more than 3,000 felony convictions in the savings-and-loan crisis. Black now talks his walk as a law and economics professor at the University of Missouri-Kansas City.

The S&L crisis of the late 1980s was a mere grenade compared to the weapons of mass wealth destruction that went off on Wall Street four years ago and the others that remain primed and ready to explode. But instead of facing indictments, JPMorgan and others face impunity. “It's clear that JPMorgan has absolutely no fear that this might have consequences,” Black said. “And why should they?”

As Black is quite right to note, there are exactly zero reasons that Wall Street should fear the consequences of its compulsive gambling, be it with the money of shareholders or the deposits of its clients.

Too Big To Fail banks like JPMorgan enjoy an implicit federal guarantee in the event a manageable $2 billion loss becomes an unmanageable $20 billion loss. These banks have also delayed implementation of the Volcker rule, which bars some speculative trades, and other provisions of the Dodd-Frank law as they work to make it more loophole than law. Most disturbing is Wall Street's success in blocking any move to restore Glass-Steagall, which required commercial banks to take deposits and make loans, not speculate like JPMorgan did. With Glass-Steagall restored we would not be talking about bailing out banks that speculate.

Headlines blare that the FBI is investigating the JPMorgan trades for evidence of crimes. But down in the fine print the bureau calls this routine. It's show, not substance, our own Captain Renault rounding up the usual suspects in Casablanca.

Says Black: “There has not been a single investigation by the Justice Department worthy of the word investigation of any of the major entities whose frauds caused the financial crisis.”

Criminal investigations now hardly matter, because most of the frauds took place before 2008. Under the five-year statute of limitations for most federal frauds, governments let the crooks run out the clock. They keep their riches, their reputations, their jobs and, absent real reform and real regulation, plunder on.

Both the George W Bush and Obama administrations have let the crooks escape. The challenger who wants to replace President Obama would be even worse. Mitt Romney wants to repeal Dodd-Frank. Unless some determined and creative prosecutor finds a way to pursue the wrongdoers, there will be no justice, just more gambling with taxpayers on the hook to pay off the markers. Only Eric Schneiderman, the New York state attorney general, offers any hope, but his staff is tiny and the crimes are mighty.

Keep in mind that in 2004 the FBI and the Mortgage Bankers Association in 2004 said there were only two kinds of mortgage fraud, both of them perpetrated by unqualified borrowers who could not repay their loans. The FBI said nothing about banks profiting off huge fees for issuing fraudulent “liar loans,” nor about why banks lacked standards and practices to turn away unqualified borrowers. I'll call that “investigativeness.”

The Too Big To Fail banks' triple play of lobbying, campaign donations and lucrative jobs for family and friends of Washington officials, elected and appointed, blocks real regulation. Budget cuts and rules in fine print have declawed the SEC and the Comptroller while filing the IRS's audit teeth down to nubs. Washington regulators are looking for problems in all the wrong places, when they are looking at all.

That's “regulationiness.” The JPMorgan derivatives debacle reveals how the appearance of banking regulation and reform, rather than actual regulation and reform, threatens the financial health of the entire nation. That's what comes of “hedginess.”

The Daily Star/Bangladesh/ 14th June 2012

From left, Muhammad Abdul Mazid, former chairman of NBR; MA Taslim, a professor of economics at Dhaka University; AB Mirza Azizul Islam, former caretaker government adviser; Zaidi Sattar, chairman of Policy Research Institute (PRI); Nihad Kabir, vice-president of Metropolitan Chamber of Commerce and Industry (MCCI); Anis A Khan, chairman of the tariff & taxation sub-committee of MCCI, and Ahsan H Mansur, executive director of PRI, attend a press meet on the 2012-13 budget, co-organised by the MCCI and PRI at the MCCI office in Dhaka yesterday.

A panel of economists yesterday doubted the chances of the government of achieving 7.2 percent economic growth in the next fiscal year.

The government may fail to reach the goal due to weak export growth amid a sluggish global demand and the presence of energy and infrastructure constraints to boost investment, they said.

They also expressed concern over proper implementation of the next fiscal year's budget due to weak capacity of government agencies.

They spoke at a press meet on the proposed budget for 2012-13, co-organised by Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Research Institute (PRI) at the chamber's office in the capital.

Only two out of the 19 indicators of the economy -- remittance inflows and revenue collection -- raise hopes, said Mirza Azizul Islam, former finance adviser to a caretaker government.

The remaining 17 indicators are clearly moving towards undesirable direction at varying degrees, said Islam.

His remarks came at a time when exports growth is slowing down, while pressure on the balance of payments is rising due to dwindling foreign exchange reserves coupled with soaring subsidy pressure.

At the same time, the government's dependence on bank borrowing has created concerns among the private sector on availability of credit.

Ahsan H Mansur, executive director of the PRI, said the global economy is experiencing a 'second round of shocks' and Bangladesh has begun to face the impact of it like other countries.

"Slowdown is very much real. It is on our doorstep," he said, adding that the global recession has certainly affected Bangladesh through the export sector and general investors' sentiment, which translated into slower manufacturing and services activities and lower investment.

But a relatively strong domestic demand due to increased remittance inflows helped sustain domestic economic activities and revenue performances, he said.

He said a strong growth in the industrial sector, generally supported by garments, is needed to achieve the government's target of 7.2 percent economic growth.

"This will be extremely challenging in FY2013 due to the weak export demand in the EU and the US," he said.

Mansur hoped the government may achieve the target for 7.5 percent inflation mainly because of the falling commodity prices on the international market and a tight monetary policy of the Bangladesh Bank.

On the budget, Mansur said implementation challenges are enormous for the government due to its capacity dearth.

The 7.2 percent growth target has been set in line with the sixth five-year plan where it was assumed that energy shortage would ease and investment would rise while global economy would remain stable, said Zaidi Sattar, chairman of the PRI.

But gas and power shortages still remain as significant impediments to rapid growth, he said. Poor investment climate stymied new investments, he added.

"If the investment rate is not rising, because domestic and foreign investments are both constrained, it is time to accept reality and reconcile with a lower GDP growth until the logjam of 24-25 percent investment rate is broken," he said.

Prof MA Taslim of the economics department at Dhaka University said the proposed budget is basically a budget driven by the conditionality of the International Monetary Fund.

Nihad Kabir, vice president of the MCCI, said the proposed budget is challenging and ambitious not in terms of allocation but in terms of the government's implementation capacity.

Noting the tight monetary policy, she urged the government not to control inflation in such a way that brings down investment and affects economic growth in future.

Anis A Khan, chairman of the Tariff & Taxation Sub-committee of the MCCI, said the economy is facing a number of challenges, which are likely to stunt growth and bring disorder in the macroeconomic management, if not addressed.

He urged the government to limit bank borrowing within the projected amount of Tk 23,000 crore to avoid crowding out effects on the private sector.

"We suggest boosting revenue collection and using foreign resources more efficiently to finance the budget deficit," he said.

The chamber also recommended proper staffing and training for capacity building of ministries and agencies for effective and transparent implementation of the projects under the annual development programme, said Khan.

He urged the government to waive interest on the incomes of life insurance policyholders, reduce advance income tax on exports and corporate income tax.

The MCCI is 'disappointed' over the government's plan to legalise undisclosed income in the next fiscal year budget, he said.

"The chamber feels that the concession, if allowed, must be limited to the incomes from legal sources and their investment should be restricted to productive sectors only," said Khan, who is also the managing director of Mutual Trust Bank.

Muhammad Abdul Mazid, former chairman of the National Board of Revenue, also spoke.

The Daily Star/Bangladesh/ 14th June 2012

Debaprosad Debnath, General Manager of Bangladesh Bank speaks at a training programme in Mymensingh recently.

AB Bank recently organised a day-long training programme on "anti-money laundering and anti-terrorist financing" in Mymen-singh.

In all, 50 branch managers of scheduled banks under Mymensingh district participated in the training programme, said a press release.

The training covered different aspects of banker's responsibilities and duties in preventing activities related to money laundering and terrorist financing through banking channels.

Debaprosad Debnath, General Manager of Bangladesh Bank inaugurated the training programme as chief guest.

Shamim A. Chaudhury, Deputy Managing Director of AB bank delivered the welcome speech.

The Daily Sun/Bangladesh/ 13th June 2012

Nirmal Chandra Bhakta, General Manager of Bangladesh Bank and Khondker Fazle Rashid, Managing Director of Dhaka Bank Limited, sign an agreement in Dhaka.

Bangladesh Bank and Dhaka Bank Limited recently signed a participation agreement on refinancing in Hybrid Hoffman Kiln (HHK) or equivalent Technology of Brick Field.

Nirmal Chandra Bhakta, General Manager, Agricultural Credit and Financial Inclusion De-partment of Bangladesh Bank and Khondker Fazle Rashid, Managing Director of Dhaka Bank Limited signed the agreement on behalf of their organisations, said a press release.

SM Moniruzzaman, Executive Director, Bangladesh Bank and Neaz Mohammad Khan, Deputy Managing Director, Dhaka Bank Limited were also present on the signing ceremony.

The Daily Sun/Bangladesh/ 13th June 2012