“Where are we going?" I asked "I don't know," he said. "Just driving." "But this road doesn't go anywhere," I told him. "That doesn't matter." "What does?" I asked, after a little while. "Just that we're on it, dude," he said.” ― Bret Easton Ellis, Less Than Zero The title of this post is, obviously, a reference to the state [...]
From strategic research partner MRB...with Alhambra's added commentary. QE is primarily a signaling device to demonstrate policymakers’ commitment to fostering the recovery and sustaining a cohesive monetary union. The policy is implicitly designed to reduce the equity risk premium. We expect a gradual re-rating of euro area equities. A cheaper euro, itself associated with QE, will also boost globally-oriented equity [...]
The Danish central bank, Danmarks Nationalbank, reduced its deposit rate floor by 15 bps to -0.5%. In what looks like a preemptive move aimed at potential destabilization ahead, so far they have managed to keep the krone from following in the franc’s destructiveness (short run). I think it is more than credibility at this point, after all the Swiss National [...]
The Keynesian revival that is currently underway in the backrooms and hallways of assorted world governments is being somewhat replicated in Europe this week. It is all predicated on the position that all previous forms of “stimulus” from the fiscal side were not the right size, composition or color for that matter and thus the lack of recovery can be [...]
Recognizing the danger of being understated, Swiss markets are a disaster. The overnight rate at -4% handily beats out the periodic specialness in US$ repo which settles at the penalty rate of “only” -3%. The 10-year bond rate is -.257%; the 15-year at -.083%. The Swiss stock index fell more than 14% in the two days after January 14, and [...]
I always believed that at some point “markets” would view the announcement of yet another “extraordinary” monetary program with actual candor rather than conditioned disbelief more befitting a magician’s audience. The primary focus would be not about future conditions, which is the entire point of monetarism in the rational expectations age, but what the “need” for more “stimulus” says about [...]
The main problem with looking at the financial world from a “dollar” funding perspective is that there really is no such monolithic existence. The funding conditions in Russia may be very different than those of Swiss banks; they also may be far too similar. Given the impossibility of direct observation, being left outside and searching for interior clues that bubble [...]
The major categories provided within the TIC estimates are a breakdown between private “flows” and those from official sources, such as foreign government and central bank accounts (as much as is known). In terms of those larger segments, there wasn’t really much of note in the update for November. There is some indication that foreign central banks might have become [...]
It seems everyone was short the franc (CHF) as a matter of taking monetarism at face value. In other words, it amounted to believing the central party line about the economy and normalcy despite the fact that markets have been increasingly pessimistic about it all and actively and aggressively betting against it. Goldman Sachs is just one of many: In [...]
It was bound to happen as the monetary affairs throughout the world “tighten.” The Swiss National Bank (SNB) had tied its fate, with good reason, to that of broader Europe but made the assumption that the ECB could accomplish both economic and financial goals. In 2011, that meant pegging the franc to the euro and using the SNB’s balance sheet [...]
Stay In Touch