With many commodity prices touching multi-year lows and with mounting fears for real estate valuations and car-lease residuals, numerous commentators seem convinced that ours is now a deflationary future. QE failed to raise CPI by anywhere near what the spin promised, they say, partly because it was ‘unsupported’ by fiscal policy. Therefore, if we don’t get Roosevelt, we’ll get Brüning, they conclude, and, meanwhile, we need the Fed to cut rates below zero, said one prominent pundit on April 5th. We replied:-
Category Archives: Central banks
Ahead of my remote appearance on CNBC Squawk Box Europe on April 3rd, I prepared a few notes for the guys which I am happy to share here with you. The main topic, ahead of the emergency OPEC meeting which briefly bolstered crude prices that week was, unsurprisingly, oil but we did also discuss the outlook for the wider economy.
On March 15th, the Eurozone branch of the Throw-more-money-at-it lobby were making themselves heard, calling for the ECB to run the printing presses for a limited (author pulls down lower eyelid with index finger) period as a supplement to the to the €120 billion in extra security purchases already made to that point. [NB total ‘assistance’ to April 17th had reached to €275bln in RP, €148bln in securities, and €126bln in FX swaps for a total of €550bln in five short weeks].We responded:-
A noted [monetary extremist] resident at GMU’s Mercatus Center fretted on March 20th that Japan’s efforts during 2001-06 to have the central bank finance deficits ‘didn’t work’ – i.e., they failed to ignite meaningful levels of wealth-sapping inflation. The reason? As our sage tells us, was that there was ‘no commitment… to a permanent expansion of the monetary base’ as expounded in the ratiocinations of that dark genius of modern central bank theorising, Michael Woodford. We replied:-
In response to an FT article of January 23rd entitled, “The new kings of the bond market”, which suggested that banks had ceded their command over fixed income to exchange-traded funds and active portfolio traders, we responded with a riff on the sorry consequences of recent financial developments: a bromide which turned out to be singularly well-timed in view of the extraordinary upheavals suffered just a few, short weeks later:-
Markets have paradoxically both been on edge – and in the throes of euphoria – since the repo shock in mid-September, being at the same time alarmed and yet strangely reassured by the Fed’s frantic backpedalling and the $400+ billion boost to its balance sheet which this entailed. Extreme levels of overstretch are everywhere apparent.
It was almost inevitable that, days after the front end of the US interest rate structure had undergone a 35 basis-point plunge, its sharpest one week fall in yield since the immediate aftermath of the Lehman Crisis, the key non-farm payroll data would also come in weak. [First published June 10th]
Mario Draghi emerged last week from the much-awaited meeting of the ECB Governing Council meeting clutching a fairly bland official communiqué which extended the envisaged freeze on interest rates out to the latter part of next year (aka, ‘forward guidance’), pledged that there would be no shrinkage of the Bank’s securities portfolio (so-called ‘quantitative tightening’) […]
After the excitement of the past few sessions, it was not entirely unexpected that what we old market stagers used to call, ‘Turnaround Tuesday’, would deliver its traditional mix of reflection, position rebalancing, and general counter-trend moves of either the stop-profit or the ‘Why do I always buy the top?’, buyers’ regret kind. [First Published […]
Back in 2017, a minor diplomatic spat erupted when seemingly credible allegations were made that billionaire Xiao Jianhua had been abducted by agents of Chinese state security from the Four Seasons hotel in Hong Kong where he was staying. Indistinct video showed the figure, said to be Xiao under the blanket covering his head, being […]