OECD Economic Review Chair Warns, Central Bankers "Are Doing More Harm Than Good, Policy Must Be Reversed"Submitted by Tyler Durden on 03/31/2015 21:30 -0400
"I fear that central bankers may have been inadvertently drawn into what they are currently doing... [QE] won't work and may have many undesired side effects that will build up over time. Many of the central bankers at Davos this year said explicitly that they were only buying time for governments to act but, seven years into the crisis, it already seems we have been waiting forever... the effectiveness of monetary policy in terms of stimulating aggregate demand goes down with time, because you're constantly bringing spending forward from the future... Logically, at this point, central bankers should say, "We are doing more harm than good. This policy must be reversed." But I don't see anybody actually doing it."
Dallas Fed's Richard Fisher had his credibility (whatever is left) crushed for the 4th month in a row. After explaining carefully to no lessor status quo glad hand than Steve Liesman that the Texas economy will see a net positive from low oil prices, Dallas Fed data has utterly collapsed - at its fastest pace since Lehman. Printing a stunning -17.5 (over twice as bad as expected -8.5), this is the 4th miss in a row (and increasingly worse misses). The Dallas Fed was last lower than this in Jun 2011. Across the board, the components were an utter disaster... employees contracted, prices paid and recoeved tumbled, production plunged, and new orders collapsed. More worryingly, furture capex tumbled once again.
The Financial Crisis of 2007 was the nearest thing to a “Near Death Experience” that the Federal Reserve could have had. One ordinarily expects someone who has such an experience- exuberance behind the wheel that causes an almost fatal crash, a binge drinking escapade that ends up in the intensive care ward - to learn from it, and change their behavior in some profound way that makes a repeat event impossible. Not so the Federal Reserve.
Former Dallas Fed president Dick "Feral Hogs" Fisher may be worried about a major correction in a market that is "hyper overpriced", and he may be confused and unable to grasp that the only reason "traders are lazy" is because the Fed's Chief Risk Officer has made risk, and selling, illegal but when it comes to finding sources of funding there are no conerns or confusion at all. Because promptly after he officially resigned from the Dallas Fed, on Thursday March 19, the very next day the board of Pepsi announced that "On March 20, 2015, the Board of Directors (the "Board") of PepsiCo, Inc. ("PepsiCo") elected Richard W. Fisher as an independent member of the Board, effective March 23, 2015. Mr. Fisher will serve on the Audit Committee of the Board, effective March 23, 2015."
In response to questions posed by Santelli, former Dallas Fed president Richard Fisher made two points which were both salient if not downright prophetic. The first: “Well, what worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation.” The second: “Are we vulnerable in my opinion to a significant equity market correction? I believe we are. Not only has the Fed painted themselves into an even tighter corner – they’ve left no clear path as to now kick the empty can.
"Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell 12.4 percent," for the week Reuters notes. This is seventh consecutive week of declines and puts us squarely back at levels last seen in 2013.
Recently retired Dallas Fed chief Richard Fisher tells CNBC that "lazy" retail investors have become completely dependent on the Fed and shouldn't expect a "diminutive" Janet Yellen to be able to save the day in the event of a significant correction.
The answer, straight from the horse's mouth.
With all deference to Dr. Richard Fisher, the surging dollar is not good for either the economy or ultimately a stronger labor market. This is particularly the case when the dollar is only stronger because the rest of the world is on the brink of recession and or deflation. The negative impact of a surging dollar in a weak economic environment will more than likely outweigh any positive inputs for the U.S. consumer. Time will tell, but the evidence is mounting that the we are likely closer to the end of the current economic cycle than the beginning.
Fed's Fisher: "[the stronger the dollar]... the better it is for our companies big and small to go out and hire American workers."
Goldman's Cohn: "the effects of the soaring dollar are just starting to be felt; for US exports, manufacturing, and jobs - it is not going to be positive."
White House Admits "Strong Dollar Is Headwind For Growth" As Greenback Surges At Fastest Pace In 34 YearsSubmitted by Tyler Durden on 03/10/2015 08:51 -0400
Forget 2013's "taper tantrum", FX markets are roiling over a full-blown "rate-hike-rage" as the USD Index surges to a new 12 year high, rising 23% in the last 8 months - the fastest surge since 1981. Not only is this dramaticaly bad for the US equity earnings picture but the carnage being unleashed across developed and emerging market currencies is almost unprecedented. Despite reassurance from The Fed that a strengthening dollar is positive for US jobs, The White House has now issued a statement that a "strengthening USD is a headwind for US growth."
- Dollar at 12-year peak versus euro, emerging markets spooked (Reuters)
- CIA sought to hack Apple iPhones from earliest days (Reuters)
- Draghi Urged Greece to Allow Troika Back Before It’s Late (BBG)
- Brent crude dips below $58 on strong dollar and supply (Reuters)
- Credit Suisse replaces CEO Dougan with Prudential's Thiam (Reuters)
- More "distressed" energy M&A: Verisk buys Wood Mackenzie for £1.85bn (FT)
- Prepare for a surge in defaults: Investors Are Buying Stocks and Bonds From Energy Producers Amid Oil Price Drop (WSJ)
- Private equity executive ordered to pay £72m to ex-wife (FT)
- Democratic donors unfazed by Hillary Clinton's use of private email (Reuters)
- Expensive Hepatitis C Medications Drive Prescription-Drug Spending (WSJ)
- 'ISIS Hackers' Almost Certainly Not ISIS Hackers (NBC)
As noted earlier, starting early with the overnight session there was already some serious fireworks in Asia, when first the USDJPY soared then tumbled, pushing the Nikkei lower some 0.7% with it, driven entirely by the surge in Dollar which rose to a fresh 12 year high overnight after gaining as much as 0.59%, in an extension of Friday’s post-NFP gains. Additionally, the EUR/USD slipped below 1.0800 to touch its lowest level since Sept’03 while USD/JPY rose above 122.00 for the first time since Jul’07, after breaching long-term resistance at 121.85. However, in recent trade the pair has seen a straight line sell-off which in turn has sent US equity futures sliding, and the ES down about 14 points as of this moment. Meanwhile, the frontrunning of the ECB continues, with German 10 Year yields sliding -3bps to 0.281%, the lowest in series history. Also touching fresh record lows were Austrian, Belgian, Dutch, Finnish, Irish, Italian, Spanish 10 Year rates.
To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed's Mester and Kocherlakota speak later today as the Fed is now - supposedly - set to hike no matter what. Here is what the other main events are for the balance of the week.