'..Federal Reserve policymaking incentivized speculation and was instrumental in nurturing an increasingly unwieldy global pool of speculative finance. Global policies since the 2008 crisis have spurred the expansion of speculative finance to multiples of pre-crisis levels..''It’s astounding how far the Draghi ECB has drifted away from core founding principles. Former ECB president Jean-Claude Trichet would regularly repeat “The ECB never pre-commits on rate policy.” This was a critical distinction from the Federal Reserve that under Greenspan became too fond of using prospective rate moves to manipulate market behavior. Federal Reserve policymaking incentivized speculation and was instrumental in nurturing an increasingly unwieldy global pool of speculative finance. Global policies since the 2008 crisis have spurred the expansion of speculative finance to multiples of pre-crisis levels. It’s also rather clear that European debt markets have evolved into a bastion of leveraged speculation. Draghi was in no mood to contemplate the party ever ending.
..
I believe history will view it was a serious mistake that the ECB did not use Thursday’s meeting as an opportunity to commence the process of weening the markets away from QE. Better to use the current “Risk On” backdrop to impose some reality as opposed to nourishing the beast. Worse yet, Draghi signaled that the ECB would continue backstopping the markets indefinitely. He spoke of “open ended” QE and stated that the ECB would be operating in the markets for “a long time.” Draghi stated that “uncertainty prevails everywhere,” implying that markets can strut with absolute certainty in “whatever it takes.” With Draghi’s assurances that QE could be boosted if necessary, the markets are more confident in an expanding program than one that will wind down at the end of 2017.
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China is today unusually fragile. Its maladjusted Bubble Economy is vulnerable to any slowing of Credit growth. Its rapidly inflating financial sector is an accident in the making. Its bloated export sector is increasingly uncompetitive globally. China’s currency is susceptible to ongoing massive outflows – “hot money,” corporate and the Chinese household sector. And each of these serious issues is being aggravated by U.S. election results and resulting higher yields and king dollar, along with the prospect for a more active Federal Reserve.'
- Doug Noland,
Renzi Falls, Markets Rise, December 10, 2016
Context'..a bastardized form of central planning which in turn is driven by China’s baroque political economy..''..the theorem of the economic impossibility of socialism .. is fully applicable to central banks..' - Jesús Huerta de Soto'..We still have too much debt, not just in the US but around the world. Budget deficits are out of control, not just in the US but around the world..'