Category Archives: Central banks

Burning Holes in Idlers’ Pockets

Inflation, Milton Friedman famously said, is a monetary phenomenon. But it is also one given the readiest of outlets through recourse to what we call ‘fiscal’ policy – i.e., by spendthrift governments borrowing money created at their call and forced into the system by means of warfare, welfare, contracting, cronyism, bureaucratic expansion and plain old boondogglery. Arguably, this is where we find ourselves today, in a world where supply is no longer likely to meet demand as abundantly and as effortlessly as has been the case these past twenty years.

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The Ship of Fools

China’s ports are humming, its exports booming to the point that it is causing evident stress in maritime trade. Freight rates are soaring and dockside space is becoming limited, threatening production and raising costs across the board. Despite the macro strength – and the vote of confidence this has received from forex and equity markets – the last few weeks have been testing ones in credit. Once more the nation’s vast superstructure of debt has creaked and groaned – but just about held firm, once more. One of these fine days…

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Tighten Your Belts: The Rationale

Markets seem happy for now to focus on the carrot of a vaccine while ignoring the stick of the further severe restrictions to life and liberty being implemented while we await its delivery. Whether or not it offers a release from bondage, the state’s rediscovered taste for authoritarianism will, however, take some good time to dispel, while its corollary – the move toward taking an ever greater role amid the wreckage of the private economy – is being pursued with relish. Whatever the sloganizing, this is very unlikely to Build anything Back Better – only dearer and scarcer.

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Fire and Water

This essay attempts a review of the economics – and the prevailing economic thinking – which have brought us to our present pass of high-leverage and heavy debt-dependence. It helps set the backdrop for an in-depth look at markets which will follow shortly…

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The Rhyme of History

While stocks have generally tended to offer better returns than Treasuries, it has not all been plain sailing for equity investors. Intriguingly, the last 50 years’ ups and downs share more than a few similarities with the first half of the last century. Could that uncanny resemblance continue to hold henceforward?

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MOVE-ing the Dial

Bond yields have started to creep higher – and curves to flex steeper – as the market begins to fret that the willing fiscal subservience of the central bank can only presage a coming inflation. With bond volatility still reasonably cheap, now might be the time to take cognisance of this.

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A Great Deal of Ruin

The Johnson government’s approach to COVID19 has been a toxic mix of contradiction, vacillation, and jackbooted authoritarianism. There seems no exit strategy and no end to the spiralling cost. We take a critical look at the impact on the budget impact and discuss what it means for inflation.

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Xi’s word is your bond

Though the latest set of profit data for China’s industrial concerns were outwardly positive, there are still many unresolved questions hanging over both the economy and the country’s politics, some of which we examine here. None of that is likely to deter bond investors and ETF buyers, of course, since their principal concern will be to bring their holdings into line with a major benchmark index which has just created a vast source of funds for Xi Jinping’s minions to exploit. We ask: should they?

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Dead Cat or Deep Value?

Since their Lockdown lows, commodities have performed as well as any other asset, though they still remain generally depressed. Can they now continue to rise?

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The Fall Approaches

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It’s not just the leaves that often turn when the year begins, with gathering pace, to slip towards its chilly end. Markets often do, too.

Given this backdrop, the sell-off in the Nasdaq – in the marvelled-at ‘Growth’ stocks, in the FAANGs, and in Tesla – comes at a moment which is particularly intriguing for reasons which go far beyond whatever coup SoftBank may or may not have attempted and whether those irritating Lockdown Livermores have finally gotten their comeuppance.