Just last week the European Central Bank (ECB) unveiled a self-produced exposé on its now openly celebrated trading operation. Only an Ivory Tower’d academic or Ph.D economist who’s never spent a day in the real world of business and/or market place could envision this as helping to bolster an image of surety or confidence.
Google "The Fed" and the search engine will offer to autofill your query with "surrenders," reflecting market concerns that The Fed has abandoned its recently more upbeat take on the domestic economy. During this week's semiannual monetary policy report to Congress, the success/failure of this appearance will hinge on the tone she chooses to strike and the conviction investors hear in her testimony and in Q&A. With so much chatter about the Fed “Losing credibility” with markets, this will be an important chance for Chair Yellen to set the record straight.
The last two-quarters of economic growth have been less than exciting, to say the least. However, these rather dismal quarters of growth come at a time when oil prices and gasoline prices have plummeted AND amidst one of the warmest winters in 65-plus years. Why is that important? Because falling oil and gas prices and warm weather are effective “tax credits” to consumers as they spend less on gasoline, heating oil and electricity. Combined, these “savings” account for more than $200 billion in additional spending power for the consumer. So, personal consumption expenditures should be rising, right?
"We have arguably reached the point that Keynes warned of in his General Theory where demand for money and credit to satisfy what he labeled “non-speculative” motives has been more than satisfied... At this point it is likely central bankers are “pushing on a string,” positively affecting prices for the financial markets’ flavor of the month but doing nothing for actual economic activity."
We should not quarrel with Senator Warren’s stated goal of protecting the least powerful in society, but we should take issue with many of Senator Warren’s proposed strategies to achieve her stated goal - because they don’t work.
Central bankers should not be treated as wise oracles whose guidance is desperately needed. Instead, we should throw off the tyranny of the PhD’s and embrace the decentralization of power that is desperately needed to allow civilization to thrive. Brexit would be a great way to start.
The approximate hour Janet Yellen spent wandering in circles and spewing double talk during her presser yesterday was time well spent. When the painful ordeal of her semi-coherent babbling was finally over, she had essentially proved that the Fed is attempting an impossible task. And better still, that the FOMC should be abolished. The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism.
When the all-important 'Dot-Plot' was unleashed this week by The Fed, we noticed two things: first, a new ultra-dovish member had appeared, and second, one member was 'missing' from the longer-term estimate. We now know who that new "Kocherlakota' is - none other than previously uber-hawkish Jim Bullard. From his March "raise rates or face devastating bubbles" speech, Bullard now believes that one rate hike is enough for at least the next two-and-a-half years...
"If ever there was a time to invoke the Havenstein experience, it is now.... We should be invoking Havenstein to identify the present flaw in institutional thinking around current monetary policy, specifically negative rates. In other words, the lesson here is that, unfortunately, people believed in the efficacy of a completely irrational policy because it was put in place by a qualified and experienced policymaker- this instead of questioning the common sense merit of its possible outcome."
While it may very well not last and all of yesterday's gains could evaporate instantly if the Brexit vote is set to take place as scheduled, all 10 industry groups in the MSCI All-Country World Index advanced, with the index rising 0.7% trimming the week’s drop 1.6%. The Stoxx Europe 600 Index rose 1.4%. Futures on the S&P 500 were little changed, after equities Thursday snapped their longest losing streak since February. . Oil rose, paring its biggest weekly decline in more than two months. Bond yields around the globe fell.