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Forget “The Great Moderation”, This Is “The Great Intellectual Failure”
Be prepared for the next great transfer of wealth. Buy physical silver and storable food.
zerohedge.com / via Scotiabank’s Guy Haselmann on 02/18/2016 15:10
A well-known central banker once said to me, “if you don’t have a Plan B, then you don’t have a plan”. When he spoke those words over a year ago, he was referring to the Fed’s lack of an exit strategy from zero rates and its QE-swollen balance sheet. He was telling me that the Fed was so focused on bettering ‘today’ through aggressive stimulus that it could not worry about ‘tomorrow’. He speculated thatcentral banks were “terrified of looking as if they were doing too little”.
Part of the Fed’s aggressiveness entailed waiting as long as possible to initiate its first hike. However, many believe that the Fed waited much too long, and in doing so missed the ideal window of opportunity to hike (for the first time in almost nine years). Some would even characterize Twist, QE2 and/or QE3 as unnecessary, labeling it monetary over-reach and the underlying source of the violent market behavior observed since the hike in interest rates.
It is likely that a non-linear direct correlation has existed between the length of time the Fed maintained its extreme accommodation and the market’s reaction at the point of rate ‘lift-off’. If this is true, then financial risk assets would have been even more adversely affected if the Fed had waited longer to hike; alternatively, markets would have had a lesser reaction if the Fed had hiked back in 2013/14. This formula likely became even more precise the further nominal GDP underperformed rosy forecasts.
The post Forget “The Great Moderation”, This Is “The Great Intellectual Failure” appeared first on Silver For The People.
Thanks to BrotherJohnF
Source: http://silveristhenew.com/2016/02/18/forget-the-great-moderation-this-is-the-great-intellectual-failure-2/
