March 30, 2016
Today Peter Boockvar sent King World News a fantastic piece warning that Western central planners are now in deep trouble.
Peter Boockvar: Outside of another round of Pavlov’s (Yellen’s) panting dog (markets) getting more food, a few things were firmly established yesterday. Firstly, it really doesn’t matter what any regional Fed President says, especially those that don’t vote as Yellen is clearly the boss and what she wants is what she’ll get…
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Peter Boockvar continues: Secondly, instead of having the desire to refill the easing chamber to prepare for the inevitable downturn whenever that might come (maybe sooner rather than later with 1% average growth over the past two quarters?), the Fed’s ammunition will mostly be just waiting for the perfect economic world before raising interest rates again and until then, near zero rate policy and QE reinvestment will be the line of defense.
And, she reiterated that because in her mind QE worked so well before, they can always do more as she believes they “still have considerable scope to provide additional accommodation.” Really? Of course the evidence speaks otherwise to the effectiveness of QE outside of its influence on asset prices as if it worked so well there never would have been the need for QE2, Operation Twist and QE3. The cost of money is currently not the binding constraint on economic activity and lowering it more thus won’t move the needle but I’m stating the obvious to anyone outside of the Fed.
Thirdly, Yellen didn’t realize it but her talk about and belief in the “automatic stabilizers” of interest rates as they respond to changes in the economic data is actually a great argument for eliminating the function of the Fed in setting (price fixing) short term interest rates and manipulating market set rates via QE. Yes Mrs. Yellen, the market is the best “automatic stabilizer” that you and your colleagues have badly damaged.
Fourthly, “data dependency” now includes the Chinese PMI data, European employment and industrial production figures, Brazilian GDP, etc… and the behavior of US stock and credit markets (of course has been for a while).
Lastly, if there is one thing for sure listening to Yellen yesterday and on the heels of all the easing from the BoJ and the ECB is the little doubt they all continue to have in the powers of central banking with ZIRP, NIRP and QE in the face of all the evidence (25 years if one looks at Japan) to the contrary. I know many like to use the Insanity quote that supposedly Albert Einstein said in describing this behavior but I found another good one from the poet Robert Frost, “How many things have to happen to you before something occurs to you?”