Trick or Treat? Paradox or Policy? Fiscal or Monetary? Debt or GDP? Risk off or Risk on? Obama or Romney?
Whichever way you look at it all of the questions remain so binary these days – never has trading and flipping a coin had so much in common. Mervyn King and Paul Tucker are like Rosencrantz and Guildenstern ~ they keep throwing heads every time QE happens. Of course they will be able to carry on pumping huge sums in to the economy whilst making sure that no one else can influence Monetary policy. It’s all about being independent and having credibility to exit whilst inflating the balance sheet. The only tool they have to drive rates higher in the longer end is through gilt sales but the exit was always going to be harder than the entry. Given the devastation in the US over the last 2 days it is hard to think that the market can really pick up steam in terms of stocks rallying whilst the clean up operation is ongoing. Certainly this is a chance for Obama to shine in terms of the rescue effort – but early estimates of $20bln are surely woefully short of what the final figure will be (see ZH article below). As such the US elections continue to weigh on market uncertainty, politics in Greece come to a head as they vote through the recent Budget proposals and supply will keep a lid on Fixed Income with 30yr Bunds & OATs (7,10 & 23yr).
“Contrary to what such forecasting disparities may suggest, economists actually know a lot about the consequences of fiscal policy, at least much more than they used to know. Until the 1980s, it was routinely assumed that the so-called “multiplier” – the ratio of change in GDP to the change in government spending – was stable and larger than one. A dollar less of spending was believed to reduce GDP by more than one dollar, so that fiscal retrenchment was economically costly (while, conversely, stimulus was effective).” http://www.bruegel.org/nc/blog/detail/article/931-the-great-austerity-debate/
“The U.S. economy is recovering from the largest adverse shock in 80 years–and a historically unprecedented shock should lead to a historically unprecedented monetary-policy response,” Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said in remarks prepared for delivery before a gathering at the University of Minnesota in Duluth.
L H5 /L H6 appears to be rich and ready to trade off from trend resistance
Chart courtesy of BBerg.
- King’s “paradox of policy”
- Bank of England out of ideas – getting monetary policy advise from school children?
- Why the little know Domestic Monetary Policy and Technology Subcommittee Matters – Watch it Live Today
- Gold, the States, and Federal Monetary Policy
- Complete Transcript Of Obama’s Debt Deal Compromise
Link to this article: : http://www.goldmadesimplenews.com/markets/trick-or-treat-paradox-or-policy-fiscal-or-monetary-debt-or-gdp-risk-off-or-risk-on-obama-or-romney-8530/