{"id":41814,"date":"2018-12-19T14:02:06","date_gmt":"2018-12-19T19:02:06","guid":{"rendered":"https:\/\/olduvai.ca\/?p=41814"},"modified":"2018-12-19T14:02:06","modified_gmt":"2018-12-19T19:02:06","slug":"no-poloz-put-ignore-boc-warning-at-your-peril","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=41814","title":{"rendered":"No \u201cPoloz Put?\u201d Ignore BoC Warning At Your Peril"},"content":{"rendered":"<h3><a href=\"https:\/\/www.sprottmoney.com\/Blog\/no-poloz-put-ignore-boc-warning-at-your-peril.html\">No \u201cPoloz Put?\u201d Ignore BoC Warning At Your Peril<\/a><\/h3>\n<p>Governor Stephen Poloz\u2019s warning last week that the Bank of Canada wouldn\u2019t backstop fluctuating stock markets drew little attention.<\/p>\n<p>\u201cIs there a Poloz Put?\u201d the central bank head asked rhetorically. \u201cNo.\u201d<\/p>\n<p>At first glance, the fact that only one BNN Bloomberg producer and a few smaller media picked up the story is hardly surprising.<\/p>\n<p>Canada is a mere bit player in global central banking and financial markets, and the opinions of any Canadian official generally carry little weight outside of local circles.<\/p>\n<p>However, in December 2017 Poloz provided investors a similar warning about Bitcoin, then trading near its all-time high, but which subsequently fell by more than 80%.<\/p>\n<p>Investors would thus be foolish to ignore him now.<\/p>\n<p>Consider:<\/p>\n<p><b><strong>One of the Fed\u2019s main policy tools<\/strong><\/b><\/p>\n<p>First, a little background. The idea that governments are key drivers of stock prices may appear ludicrous to those who believe that Western economies are free markets.<\/p>\n<p>However, as Moody Analytics <a href=\"https:\/\/www.moodysanalytics.com\/-\/media\/article\/2018\/weighing-the-wealth-effect.pdf\">notes<\/a>, higher asset prices and resulting wealth effects are one of the Federal Reserve\u2019s main policy tools for achieving its inflation and economic growth targets.<\/p>\n<p>For U.S. stock traders operating today, most of whom have never seen a crisis that government hasn\u2019t bailed them out of, the Fed\u2019s most important manipulation is the existence of a tacit \u201cput,\u201d which ensures that asset prices won\u2019t fall too far.<\/p>\n<p>Former Federal Reserve Chairman Alan Greenspan, Ben Bernanke and Janet Yellen all intervened to boost asset prices at key points when the heavily-indebted U.S. economy appeared set to implode.<\/p>\n<p>The Bank of Canada\u2019s policies are less overt. While the central bank claims that it \u201cdoes not target asset prices,\u201d asset price manipulation is clearly direct \u201ccollateral damage\u201d resulting from its other policy objectives.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>No \u201cPoloz Put?\u201d Ignore BoC Warning At Your Peril Governor Stephen Poloz\u2019s warning last week that the Bank of Canada wouldn\u2019t backstop fluctuating stock markets drew little attention. \u201cIs there a Poloz Put?\u201d the central bank head asked rhetorically. \u201cNo.\u201d At first glance, the fact that only one BNN Bloomberg producer and a few smaller [&hellip;]<\/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":[942,103,13228,6355,943],"class_list":["post-41814","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-canada","tag-peter-diekmeyer","tag-sprott-money","tag-stephen-poloz"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41814","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=41814"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41814\/revisions"}],"predecessor-version":[{"id":41815,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/41814\/revisions\/41815"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=41814"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=41814"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=41814"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}