Sunday, November 02, 2014

DO whatever it takes

"Importantly, the risks were deeply systemic. Policy responses were systemic. Draghi moved forward with “Do Whatever it Takes,” followed soon by open-ended QE from Bernanke and Kuroda. I never bought into the notion that Fed “money” printing was about U.S. jobs. I don’t believe Kuroda’s move Friday was about Japanese inflation. Policy responses have been akin to Benjamin Strong’s 1927 “coup de Whiskey,” but on a multi-shot global basis (with chaser). And over the past two years we’ve witnessed a 1927 to 1929-like market response, again on a globalized basis. 

Predictably, throwing Trillions of “money” at a global Bubble has only exacerbated instability. Throwing Trillions of “money” at dangerously maladjusted global financial and economic “systems” will surely only worsen the addiction. I see Kuroda’s move as further evidence of global central bank desperation. Global risks have inflated profoundly since 2012."

There are no sound money policies being followed by any world Central Bank, just print away so to speak and all our troubles will go away. Since 1980 with Greenspan, then Bernanke, now  Yellen LOW interest rates and the new QE gambit have given us 35 years of falling interest rates, rising bond prices, worlds longest running bull market , the bond bull. Nothing lasts forever.

What eventually follows EVERY bull market is a bear market. A bear market in bonds would mean rising interest rates. For 5 years now, savers have been punished with near 0 returns on savings. Savings are discouraged, speculating is encouraged. Asset appreciation, looks and feels good has been the aim of the FED since they began easing, then injecting trillions with QE into the speculating pool.

Looks good, feels good, but a false high.

You don't get prosperity  by printing money or every corner of the globe would be rocking. It would be that easy. These policies have made the inequalities around the globe even more pronounced between the upper crust and the stale bread.

Nothing comes for free and no cost, many do not care when or if the piper gets paid. But paid he will get, with more than a pound of flesh when the spring gets uncoiled. It is reaching that zenith in the law of diminishing returns. Just mention QE, throw money out of thin air, and watch the markets soar.

Nope, what me worry?


No comments: