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Central Banks

Corona, Corona, Corona Bonds Really Do Have More Fun!

The equity market finally showed some sensitivity to the effects of the coronavirus (Covid-19) last week with the S&P 500 falling 1.25% from its record high close on Valentine’s day for the holiday shortened week.  The leading issue which dominated every news cycle (except for the Democratic debate for a few hours) was Covid-19 and the economic uncertainties surrounding it.  Markets rose on news or speculation that infection cases were …Read More

Demographic Trends: The Case Against Negative Interest Rates

Japan has a 2.2% unemployment rate, yet, for 30 years, they have not had any significant economic growth, due to their demographic structure. Today, the developed world has Japan’s 1990s demographic features, with falling fertility rates, rising dependency ratios (retirees/working aged), and, ultimately, declining populations. Under these conditions, aggregate GDP growth will be harder and harder to achieve. QE’s “Wealth Effect” All the central banks of developed economies have adopted the Fed’s …Read More

The Deer in the Headlights

The big event of August, the one that was going to move markets, was supposed to be Jay Powell’s remarks at the KC Fed’s annual symposium at Jackson Hole.  Turns out, his speech was a non-event! The Powell Non-Event The media made it their purpose, prior to his speech, to spotlight the fact that the FOMC members, the Fed’s rate setting committee, are very divided on the appropriate policy, given …Read More

What Investors Believe: Central Banks Have Their Backs

In a world of fragile economic growth where the odds of recession have been on the rise, investors are now convinced that central banks (CBs), led by the Fed, have their backs, as they see the CBs as “buyers of last resort.” Note that the Fed, whose legislative mandates are low unemployment and stable prices, has morphed into the role of equity market savior beginning in the Greenspan era and rolling …Read More