This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here. Reposted with permission.
Is a meaningful de-risking/de-leveraging episode possible with global central banks injecting liquidity at the current almost $2.0 TN annualized pace?
Thus far, central bankers have successfully quashed every incipient Risk Off. Market tumult has repeatedly been reversed by central bank assurances of even more aggressive monetary stimulus. The flood gates were opened with 2012’s global concerted ‘whatever it takes.’ Massive QE did not, however, prevent 2013’s ‘taper tantrum.’ Previously unimaginable ECB and BOJ QE coupled with ultra-loose monetary policy from the Fed were barely enough to keep global markets from seizing up earlier in the year.
It’s my long-held view that market interventions and liquidity backstops work primarily to promote speculative excess and resulting Bubbles. While celebrated as ‘enlightened’ policymaking throughout the markets, an ‘activist’ governmental role (fiscal, central bank, GSE, etc.) is inevitably destabilizing. The upshot of now two decades of activism is a global marketplace dominated by speculation and leveraging.
This post was published at Wall Street Examiner by Doug Noland ‘ September 17, 2016.