Central Bank Money Rules the World
Central bank credit that supports markets — is not just creation of the Fed, but by central banks and institutions around the world colluding together. Global markets are too deeply connected these days to consider the Fed in isolation.
Since last month’s correction, the world has been watching the Fed because its policies have global implications. And worldwide sell-offs sent a clear sign to Fed Chair Powell to relax with the rate hikes.
When fears arise that central bank QE will recede on one side of the world, we see more volatility and rumors of hawkishness. To counter those fears, there will be a move toward dovish policy on the other side of the world.
Central banks operate in collusion. When the Fed signals it is raising rates, or markets over-react negatively to the threat, another central bank steps in. By colluding, other central banks offer even more dark money-QE to keep the party going.
The net result is a propensity toward the status quo in global monetary policy: a bullish, asset bubble-inflating bias in the stock markets and caution in the bond markets.
Here’s what’s going on with some of the most powerful central bankers right now, starting with Japan…
While U.S. markets were correcting earlier this month, Japan’s financial benchmark, the Nikkei 225 index fell more than 1,200 points. At the same time, the rumors of Japan’s central bank curbing its dark money-QE programs are just that.
While investors have speculated that the BoJ could be moving towards an exit from dark money policy (despite the BOJ denying this), we know that central banks are too scared of the outcomes.
In an economic pinch, the Bank of Japan (BoJ), will keep dark money flowing.
Confirming my premise, when Japanese Government Bond prices were dipping too fast, the BoJ announced “unlimited” buying of long-term Japanese government bonds. This is simply the continuation of the policy the BoJ already has in place.
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