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On The Failure Of The Narrative Of ECB Omnipotence
Submitted by Ben Hunt via Salient Partners Epsilon Theory blog,
The strong do what they can, while the weak suffer what they must.
-- Thucydides, “The History of the Peloponnesian War” (395 BC)
Global growth is really bad! Hooray!
That was the verdict of US markets yesterday, as the Fed minutes “revealed” (to use the breathless phrasing of mainstream financial media) a “growing concern” with the damaging impact of European torpor and a stronger dollar on US growth, and it’s a perfect example of why I’ve called a top in the Narrative of Central Bank Omnipotence. Not a top in market price levels (although I’m increasingly thinking that, too), but a top in market faith that price levels are completely determined by central bank policy. This is an observation that I’ve discussed at length (and perhaps ad nauseam) in recent Epsilon Theory notes like “The Ministry of Markets” and “Fear and Loathing on the Marketing Trail”, so I won’t belabor that again here.
What’s interesting to me is not this latest success of the Narrative of Fed Omnipotence. No, what’s interesting to me is this week’s failure of the Narrative of ECB Omnipotence. The Fed minutes totally bailed the market out today and (truly) revealed the Fed as the only central bank with the Common Knowledge firepower to withstand a serious growth scare. The ECB, on the other hand, has lost an enormous amount of Narrative mojo over the past week. The perception of Mario Draghi has clearly shifted from Super-Mario, willing and able to do “whatever it takes”, to what we would call in Texas “all hat and no cattle”.
Is this fair? Is this reflective of fundamental reality? No, of course not, but since when did that matter? Draghi didn’t change. Germany’s position didn’t change. Miserable European growth rates didn’t change. What changed is the direction of US monetary policy. Draghi’s beautiful words work wonders when he’s standing behind the 600-lb gorilla of the US Fed. But when that gorilla begins to stumble off along a different jungle path, as we’ve seen over the past few months … well, that’s an enormous challenge even for as skilled a Missionary as Mario Draghi. Toss in a few well-timed slashes from a master bureaucratic knife-fighter like Jens Weidmann, some disappointing macroeconomic news, and all of a sudden you’ve got a crisis in confidence with European markets.
I’m reminded of the distinction in political regime theory between “sensitivity” and “vulnerability”. Sensitivity reflects the forcefulness with which external events impact a country or institution within a given regime. Vulnerability reflects the cost of changing that regime. So, for example, while both the US and Japan would be quite sensitive to a supply shock in the price of oil from a Middle Eastern blow-up, Japan would be far more vulnerable than the US if that temporary shock became a permanent change in the oil supply picture. Because the US has more domestic energy alternatives, the long-term cost of adapting to a new and different energy world would be much greater for Japan than the US. Similarly, while both the Fed and the ECB are sensitive to growth shocks, the ECB is far more vulnerable to a world of secular growth stagnation. And the market smells that vulnerability like stink on a wet dog.
I’ll have more to say about sensitivity and vulnerability in future notes, because I think it’s a valuable concept for asset allocation and risk management. Beta and volatility are measures of sensitivity, not vulnerability, but they dominate our econometric risk measurement techniques. We need a measure of portfolio vulnerability (and this is not at all the same thing as tail risk), and I think it lives in the epsilon term.
Today, though, the Epsilon Theory point is that we’re seeing the first unexpected ramification of a divergence in global monetary policy – the ECB is revealed as the yappy little Chester to the Fed’s bulldog Spike. Now in the cartoons there’s always a large enough scare to turn big bad Spike into a quivering mess, and that may well turn out to be the case as the global growth boogieman continues to grow in scale and scope, particularly if it spreads into the political sphere. But for now markets are still fervent believers in Fed Omnipotence, even as faith in the ECB is starting to crumble. I’m a seller of both Narratives.
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watching CNBC..
they sound panicked...
is it an act?
i dont think so....
ITS ON< BITCHEZ!
Start the countdown lol BITCHEZ!
The strong die too!
STOP watching CNBC..
they sound panicked...BECAUSE THEY ARE PAID TO SOUND THAT WAY
is it an act? YES
Mossad paid them, right? And nice post of people jumping from burning building. You obviously have good taste.
They are actors paid by their employer, Comcast Corporation, formerly registered as Comcast Holdings, the largest broadcasting and cable company in the world by revenue. It is the largest cable company and home Internet service provider in the United States, and the nation's third largest home telephone service provider.
Good taste? Like the five Israeli Mossad agents that were dancing and celebrating while they filmed the burning building, WTC, which you mentioned? That kind of good taste? Or a different kind?
Yeah, and a plane didn't hit the pentagon, either. Dumb shit.
It sounds like you are denying the five dancing Israeli Mossad agents, arrested by the NYPD, and released by the FBI, even existed?
--------------------------
The men were taking video or photos of themselves with the World Trade Center burning in the background [Good Taste?], she said. What struck Maria were the expressions on the men's faces. "They were like happy, you know … They didn't look shocked to me. I thought it was very strange," she said.
She found the behavior so suspicious that she wrote down the license plate number of the van and called the police. Before long, the FBI was also on the scene, and a statewide bulletin was issued on the van.
The plate number was traced to a van owned by a company called Urban Moving. Around 4 p.m. on Sept. 11, the van was spotted on a service road off Route 3, near New Jersey's Giants Stadium. A police officer pulled the van over, finding five men, between 22 and 27 years old, in the vehicle. The men were taken out of the van at gunpoint and handcuffed by police.
The arresting officers said they saw a lot that aroused their suspicion about the men. One of the passengers had $4,700 in cash hidden in his sock. Another was carrying two foreign passports. A box cutter was found in the van. But perhaps the biggest surprise for the officers came when the five men identified themselves as Israeli citizens.
According to the police report, one of the passengers told the officers they had been on the West Side Highway in Manhattan "during the incident" — referring to the World Trade Center attack. The driver of the van, Sivan Kurzberg, told the officers, "We are Israeli. We are not your problem. Your problems are our problems. The Palestinians are the problem." The other passengers were his brother Paul Kurzberg, Yaron Shmuel, Oded Ellner and Omer Marmari.
When the men were transferred to jail, the case was transferred out of the FBI's Criminal Division, and into the bureau's Foreign Counterintelligence Section, which is responsible for espionage cases, ABCNEWS has learned.
One reason for the shift, sources told ABCNEWS, was that the FBI believed Urban Moving may have been providing cover for an Israeli intelligence operation.
http://abcnews.go.com/2020/story?id=123885
You post this and prove your own ignorance. Where in this long description is the word "dancing"?
So far, you have a red herring and an ad hominem attack. Impressive.
You know what they say about little knowledge.
I am guessing it has something to do with the cast of CNBC.
Okay, I just read your favorite link that I've never read before because I've always thought you were an idiot. And this is more proof for me. My tin foil crinkles in the USA direction.
From your favorite link:
"The investigation, at the end of the day, after all the polygraphs, all of the field work, all the cross-checking, the intelligence work, concluded that they probably did not have advance knowledge of 9/11," Cannistraro noted.
As to what they were doing on the van, they say they read about the attack on the Internet, couldn't see it from their offices and went to the parking lot for a better view. But no one has been able to find a good explanation for why they may have been smiling with the towers of the World Trade Center burning in the background. Both the lawyers for the young men and the Israeli Embassy chalk it up to immature conduct.
... several of the detainees discussed their experience in America on an Israeli talk show after their return home.
Said one of the men, denying that they were laughing or happy on the morning of Sept. 11, "The fact of the matter is we are coming from a country that experiences terror daily. Our purpose was to document the event."
Now, there is an appeal to authority if I have ever seen one.
Exactly.
Wow, you should work for the FBI.
Can you get me an interview?
What is the maximum age for a new hire?
Will I get one of those piece of shit recalled GMs as a company car?
Can I keep my day job?
Will I have access to your wife's webcam like the NSA does?
Most importantly, is insider trading legal for the FBI, like it is for congressional staffers?
i think this war thread is going to go on for a while...
Not nearly as much as those white house reporters that got caught on the hot mic THINKING THEY WERE OFF CAMERA making prep plans for Ebola.
pssssst.....the elite already get it, wihout the benefit of the mass media.
CNBC has a Democratic Party election victory to support. This is not part of the plan.
Elsewhere: Shares of Ebola hazmat suit maker go ballistic in heavy trading http://tinyurl.com/kyy9ewd
So I shouldn't have just went long Facebook?
No but you should learn how to conjugate the verb to to: go...went....gone....
Right, it's not 'went long', it's 'goned long'. People need some book learnins.
IF you want 'breathless" reporting from the MSM, just tune in tonight's newscasts regarding Ebola. No new cases outside of Africa, mind you, but suspected cases and treatment in European countries of several people infected in Africa.
How many die of AIDS each year? About 1 million? Not sexy enough.
It's funny how this panicky reporting about Ebola seems limited to only the US media. (And to ZH of course, whose business model is to try to create panic and sensation at all times.) Here in Europe (or at least the parts of it whose news I read), there is a daily headline or two of factual reporting about the spread of the outbreak, but no alarm whatsoever. I wonder what the reason is for this difference.
in part it's traditions. in general we europeans do disincourage breathlessness in political and in any way "serious" matters. cultural preference
one thing I have always wondered about you europeans,
why are you europeans so sensible in most everyday matter compared to say Americans
yet on the upper levels your banks and financial institutions all follow the very wall st model of financializing the economy to a tee and beyond, which completely flies in the face of common sense?
this is a honest question btw, I'm seriously puzzled
how can you Europeans who are so sensible in everyday life lack the same sense when it comes to the high ends of the economy?
There's really nothing mysterious about it. For the time being, we're living in an American world. The international monetary and financial system is to all intents and purposes designed and controlled by America, which I guess ultimately means by Wall Street. You play by those rules, or else you don't play. Simple as that. It's just the same in finance as in politics, where the European countries are basically vassal states to the American Empire.
But this era is quickly running out...
One of the funniest scenes from Friends:
Monica: "Hey, Joey! What would you do if you were omnipotent?"
Joey: "Probably kill myself."
Monica: "Excuse me?"
Joey: "Hey, if Little Joey's dead, I got no reason to live."
Ross: "Uh Joey... OM-nipotent."
Joey: "You are? I'm so sorry."
Neither the Fed nor the ECB have the power to run the shit show once the smoke and mirrors trick dies. Fed & ECB: meet Ebola.
"Omnipotence"
Interesting word to describe thieves with.
An American, not US subject.
Watching BBC UK interview with Gorge Odd-Porn, he looks nervous and tense. Something afoot?
Cash on sidelines for now.
SBR . http://hedgeaccording.ly/2014/10/y-combinators-graham-livingston-maybe-w...
So who's more 'vulnerable' to an end to US-dollar hegemony then? That is inevitably where this is all heading.
Your 600 lb gorilla will all of the sudden lose a lot (like all) of his weight.
just had to check my calendar & make sure the year we are in (2014, still) after seeing this:
Draghi Says Investors Predict First Increase in ECB Interest Rates by 2017
http://www.bloomberg.com/news/2014-10-09/draghi-seeks-structural-reforms-with-ecb-ready-to-act-if-needed.html
Is it time to make popcorn, fat chair, and the 'Big Show' we have all been talking about for the last eight years? Or, is it just another preview, an official Fed 'Trailer' to the upcoming release of the blockbuster of blockbusters? Man, do I have alot of popcorn to pop....
Ya and the movie is called "Quantitative Easing 5- The Fed Strikes Back"
"The Fed minutes totally bailed the market out today and (truly) revealed the Fed as the only central bank with the Common Knowledge firepower to withstand a serious growth scare."
Biggest canard out there since 2008 is that central banks have helped growth
Indeed. Money printing undermines the economy, it does not produce "growth".
He's reading it all wrong. This isn't a broken narrative or impotence, in their eyes. This is a call for more action by them to save lives and banks and stuff. The playbook is open for anyone who wants to read it. The gameplan is being followed. Everyone knew there would be a deflation. Everyone should know what the answer is.
It might be painful but then again it might hurt a lot too.