In what Bloomberg's Richard Breslow calls "a sign of the times, and not a good one" the weekend has been dominated by politicians commenting on the ECB. Not only did Erdogan un-independently suggest Turkish policy action today (as we noted here) [6], but now Merkel, Hollande, Noonan etc. are all telling you what the ECB should do or indeed will do and then telling you that, of course, the ECB is independent. Central Banks have
essentially become enormous sovereign wealth funds manipulating the
markets and very much in the thrall of geo-political events. This is a very problematic development which is an inevitable follow-on to the activism of central banks in their policy conduct.
Via Bloomberg's Trader's Notes,
Interesting weekend, as you look at the big picture, with the fallout from the SNB and the lead-up to the ECB. Winners and losers galore and one has to wonder why those who didn’t take the three years of the CHF cap to hedge their exposures made such poor decisions -- short-term greedy and long-term poorer, Bloomberg’s Richard Breslow writes.
Here’s what you see: Another round of rate cuts (DKR, TRY), Russia getting downgraded, IMF slashing world economic outlook, people in Austria wishing they were Hungarians after tallying up what they owe on their CHF mortgages,and China GDP okay but signaling further easing needed.
More importantly and very much a sign of the times, though not a good one, everyone has been commenting on the ECB, including Merkel, Hollande, Noonan etc., all telling you what the ECB should do or indeed will do and then telling you that, of course, the ECB is independent; this is a very problematic development which is an inevitable follow-on to the activism of central banks in their policy conduct
[Central Banks] have essentially become enormous sovereign wealth funds manipulating the markets and very much in the thrall of geo-political events; they have turned their single or double mandates into multi-factor models causing investors as well as themselves endless confusion
Keep an eye on this development; we make a lot of hay over people like Erdogan messing with Turkey’s central bank; we are seeing the same phenomenon playing out live in Europe
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