Category Archives: Monetary Policy - 17 posts found

Monetary Policy Still Too Hot for Germany

An ongoing theme we kept coming back to throughout 2015 in the eurozone is that monetary policy tends to either too hot or too cold for the core or periphery.  The ECB’s attempts to fight deflation and reflate the periphery…


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Financial Conditions Keep Tightening

Financial conditions are slowly but surely tightening.  We have had one actual rate hike by the Fed, but conditions had begun to tighten before this. This is primarily a developed market phenomenon. Real M1 for the G7 has been trending…


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Despite the rout, excess liquidity will prove to be supportive

  Stock markets are experiencing a classic crash pattern.  Volatility has spiked and sharp sell offs are often being followed by powerful rallies.  As with previous crash patterns, we would expect markets to continue to gyrate wildly for around the next…


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ECB QE: Inflation to Start Surprising to the Upside

The sharp devaluation in the euro and the rapid acceleration in economic activity will mean short-term inflation dynamics in the eurozone will soon start surprising to the upside.  In this context it is important to remember that the only justification…


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Yield Curves Flattening Everywhere: Global Growth to Slow

As we remind our readers often, yield curves are one of the single best leading indicators.  A yield curve inversion has predicted every US recession since 1945, with only one false positive, in 1966 (although the false positive preceded a…


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UK Credit and Money Growth at Extremes

Easy monetary policy in the UK is looking ever more inappropriate.  Divisia money is a weighted money-supply measure.  Higher forms of money, eg notes and coins have greater weights than less liquid forms of money, such as building society deposits. …


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Variant Perception on the US labour market and the future course of Fed policy

simon white

Variant Perception’s editor Simon White spoke to BNN this morning about the future course of Fed policy and the US labour market. Highlights included the likelihood that the Fed will stay looser for longer as well as how the market may have overestimated the actual pace of tapering.


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The case of the disappearing liquidity in corporate bond markets

One of the themes that we have been highlighting this year is the growing bubble in corporate bonds. It is pointless in the first instance to discuss whether super easy monetary policy that has fueled this bubble is appropriate or not. The main thing for investors to countenance is that the current monetary policy regime is having unintended consequences through the formation of a bubble in increasingly scarce liquid fixed income instruments.


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Central bankers and politicians getting complacent

The economy and financial markets remain in the grips of the most easiest monetary policy the world has ever seen. The balance sheets at the Fed and the BOJ continue to expand at record pace and global real rates have been negative for over 3 years now. Negative real rates create tremendous incentives for borrowers to lever up and often create asset bubbles in debt, equity and property.


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Bonds and Stocks are Still Mispriced

No-one ever said that investing was easy, but when textbook correlations start to break down it can be outright painful. Such of course has been the environment in recent couple of months with stocks and bonds falling in unison. It won’t last forever, but it may persist for a while longer.


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