Wednesday, February 17, 2016

I blame the Fed, BOJ and ECB for whats happening now

The central banks remind me of the movie ‘One Flew Over the Cuckoo's Nest’ where the doctors are the insane, whereas the inmates are actually quite common people with common sense and normal. This is exactly what I think is happening today.


My sense is that many policies that were implemented- in particular zero interest rates and more recently negative interest rates- are rather negative for asset markets than positive. They create a lot of uncertainty in investors’ minds and we have statistics on all the countries that have introduced negative interest rates. In all these countries actually the savings rate went up.

These policies may be actually counterproductive. They are negative for bank earnings. I’m not blaming only the Fed. I’m blaming the Fed, the Bank of Japan and the ECB under Mr. Draghi. They talk to each other every day, they coordinate monetary policies and they come from the same Neo-Keynesian background.