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Companies and investors have some big decisions ahead of them as we start the second half of the year. They can be summed up in one super-critical question: “Do they believe that global reflation is finally now underway?” The arguments in favour of this analysis were given last week by European Central Bank President, Mario Draghi: […]
Italy was one of the 6 founding members of the European Union (EU) in 1957, along with France, the Netherlands, W Germany, Belgium and Luxembourg. Its referendum next month will therefore be a critical test of whether the Eurozone and EU can survive the pressure from the Populists. If the Populists win, then the future […]
Italy’s referendum is next test for Eurozone stability Read More
TIME magazine covers often capture the mood of a moment. And that was certainly true in February 1999, with their now famous cover picturing then US Federal Reserve Chairman, Alan Greenspan, under the heading “The Committee to SAVE the World“. In a further sign of the times, Greenspan was flanked by the US Treasury Secretary […]
Markets question central bank power as Great Reckoning nears Read More
Last week as the BBC reported, Bank of England Governor, Mark Carney, explained to an audience in Birmingham that the Bank had saved the UK economy after the Brexit vote in June: “Between 400,000 and 500,000 jobs could have been at risk if the Bank had not taken action after the referendum, he said. ”We are willing […]
Markets doubt Carney’s claim to have saved 500k UK jobs Read More
The world’s central bankers would have been sacked long ago if they were CEOs running companies. They would also have been voted out, if they were elected officials. Not only have they failed to achieve their promised objectives – constant growth and 2% inflation – they have kept failing to achieve them since the Crisis […]
Central banks head for currency wars as growth policies fail Read More
Central bank policy-making is becoming more and more dysfunctional, as German Finance Minister Wolfgang Schäuble‘s comments highlighted on Friday: “The debt financed growth model has reached its limits. It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy….and may have laid the foundation for the next crisis.” One clear sign […]
“Debt-financed growth model has reached its limits”, admits German finance minister Read More
Financial markets are very bad at evaluating political risk. They assume people will always be rational, and expect a ‘business as usual’ scenario to continue. But as we all know, people are not always rational. And emotion, as today over immigration may cloud their judgement. This week has seen the first signs of this complacency […]
Brexit poll creates UK, euro interest rate rise risk Read More
Pity poor Janet Yellen, you might say. The head of the US Federal Reserve told the Senate this week that she had been “quite surprised” by the collapse of oil prices since mid-2014. And she added that the rise of the US$ was similarly “not something that we had expected” (you can see the testimony […]
Tokyo, Shanghai stock markets crash; yen rises 8% in 2 weeks Read More
“There is no doubt that if we had to intensify the use of our instruments to ensure we achieve our price stability mandate, then we would.” (Mario Draghi, New York, Friday) Pity poor Mario Draghi, President of the European Central Bank (ECB). He is used to the adulation of markets – and adores his nickname […]
Central banks have acted as the proverbial tooth fairy towards financial markets in recent years. But they have not just left a small amount of money under the pillow when a child lost its first tooth. Instead they have printed trillions of dollars via Quantitative Easing (QE), to persuade investors to buy shares and commodities, […]
Markets need more cash from the Janet Yellen tooth fairy Read More
Historians will not look kindly on Mario Draghi, head of the European Central Bank. They will ask what he thought he was doing, issuing an extra €1tn ($1.05tn) of debt from March 2015, when the Eurozone was already struggling under a dead-weight of government debt: In the big countries, Italy has $47k of debt per person; […]
European interest rates go negative as Draghi boosts stock markets Read More
The last 10 days have seen turmoil in major currency markets: The Swiss National Bank gave up trying to devalue versus the euro, and the franc jumped 30% in minutes The European Central Bank (ECB) launched its €1tn Quantitative Easing (QE) programme, causing an immediate 3% fall in the euro’s value versus the dollar These are major moves by any historical […]
Eurozone joins Japan’s ‘currency war’ versus the US dollar Read More
It is impossible to overstate the seriousness of today’s threat from deflation. Policymakers refuse to accept that demographic change can create an economic impact. Instead, they want to believe that increasing debt can somehow stimulate growth. The Financial Times has kindly headlined the blog’s letter on this subject as its lead letter. June 10, 2014 […]
ECB gives a figleaf for politicians to hide behind Read More
A year ago, European policymakers and central bankers were dismissive when the blog suggested deflation was a far bigger threat than inflation – when it was speaking at the world’s major conference for bond investors. Later this month, the blog expects a different response when returning to speak at the same conference. Last week, the European Central Bank (ECB) was forced to […]
European policymakers no longer able to ignore deflation Read More
Its now nearly 2 years since the head of the European Central Bank (ECB) said he “was ready to do whatever it takes” to save the euro, and brought down interest rates in the weakest PIIGS economies (Portugal, Ireland, Italy, Greece, Spain). As the chart shows, this statement had a remarkable effect in financial markets: Interest rates today […]
Euro elections likely to see strong vote for anti-EU parties Read More
A major debate is underway in Eurozone financial markets about the imminent approach of deflation. As the chart above shows, Eurozone inflation has ben falling steadily for the past 2 years. Yet most still fail to recognise that today’s demographics make this development more or less inevitable. The Financial Times has kindly printed the blog’s […]
Demographics drive demand and fertility rates have fallen Read More
Think back a moment to September 16 2008. Newly released transcripts analysed by the Wall Street Journal and Financial Times reveal for the first time what was really going on that day at the world’s most important central bank. Lehman Bros, one of Wall Street’s largest investment banks, had just gone bust. Merrill Lynch, another giant, had […]
“Reservations are no longer necessary at many high-end restaurants” Read More
The president of the European Central Bank, Mario Draghi, was ‘person of the year’ in financial markets with his July promise to “do whatever it takes” to save the euro. 6 months later, it seems worth checking on the current situation.
The chart t…
Eurozone’s ‘Draghi rally’ faces election test in Italy Read More