{"id":21805,"date":"2016-09-24T08:33:26","date_gmt":"2016-09-24T13:33:26","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21805"},"modified":"2016-09-24T08:33:26","modified_gmt":"2016-09-24T13:33:26","slug":"traveling-circus","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21805","title":{"rendered":"Traveling Circus"},"content":{"rendered":"

Traveling Circus<\/a><\/h3>\n
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After Wednesday\u2019s policy statements by the Fed and Bank of Japan, a harsh light is being shined on the incredible nature of their communications. It would be wise in the current environment to structure investment portfolios with a pro-volatility bias.<\/p>\n

Central banks in G7 economies have been carrying a heavy load for a very long time, especially noticeable to all since 2009. Zero and negative sovereign interest rates, asset purchase programs and whack-a-mole currency devaluations have avoided a counterfactual that would have included credit exhaustion, debt deflation and economic contraction.<\/p>\n

Their now conventional unconventional monetary policies have been overlaid by communications policies that have fostered a narrative of economic normality and cyclicality. It all seems rather disingenuous given their successful coup de march\u00e9, and maybe a bit delusional too given their serious demeanors discussing Philips curve stuff in the face of balance sheet time bombs.<\/p>\n

And now\u2026central banks seem exhausted too, not only in terms of being able to stimulate consumption and levitate asset prices, but also in terms of their communications policies that suggest they can.<\/p>\n<\/div>\n

The BOJ may have jumped the shark when it embarked on a new program called \u201cQQE with yield curve control\u201d whereby it will pin 10 year JGB yields at 0%. The BOJ also signed on to a new program called \u201cinflation overshooting commitment\u201d whereby it will keep creating sufficient base money until CPI inflation exceeds 2%. Let there be no mistake: this is formalized QE Infinity.<\/p>\n

It was a tacit admission that lowering funding rates further would have no stimulative impact on the Japanese economy, and that all it can do at this point is expand the size of its balance sheet. BOJ watchers do not understand why more attention wasn\u2019t paid to the short end of the curve, which would be easier to manage.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Traveling Circus After Wednesday\u2019s policy statements by the Fed and Bank of Japan, a harsh light is being shined on the incredible nature of their communications. It would be wise in the current environment to structure investment portfolios with a pro-volatility bias. Central banks in G7 economies have been carrying a heavy load for a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[57,85,124,303,4349,13233,534,558,1389,14371,3650,12967,4318,1939],"class_list":["post-21805","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-japan","tag-boj","tag-central-banks","tag-fed","tag-g7","tag-macro-allocation-com","tag-monetary-policy","tag-negative-interest-rates","tag-nirp","tag-paul-brodksy","tag-us-federal-reserve","tag-zero-interest-rates","tag-zerohedge","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21805"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21805\/revisions"}],"predecessor-version":[{"id":21806,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21805\/revisions\/21806"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21805"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21805"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}