Friday 10, June 2022
The ECB and the Fed are now falling into line and promising to slow down asset purchases and raise rates. In the case of the ECB this is for the first time in about a decade, and also to a level that is almost positive. The Eurostoxx 50 crashed around 3.45% It seems insane to think that the the promise of a 25bp increase in the ECB policy rate can cause such mayhem. It seems incredible that with inflation in the Eurozone projected to be 6.8% annualized, that the ECB is still buying bonds.
Independent central banks, tasked with controlling inflation, are a seventies creation. The very existence of the Fed and the ECB in their current form (as for the Bank of England) is to be the adult in the room, to fight inflation because governments cannot be trusted to. If they fail, their very existence is at risk. It’s not suprising that they are likely to prioritize getting inflation down, even at the risk of triggering a recession. Recessions can be blamed on war, stimmy checks, the Saudis, Russia, bad demographics, China, the ESG movement. Central banks have promoted the idea that they alone can be trusted with holding the price level steady (or increasing at 2% of so, if you want to be picky). They cannot afford to return to the 70s. JPoww has burned his flares and Afghan jacket.
I am posting direct to Reddit, because my script fails to upload Twitter embeds. Same goes for images. I hope to work something out soon.
Daniel Yergin’s book of this name is fascinating. John D Rockerfeller was an extraordinary man.