Morning

After the puke yesterday, markets are fairly muted. Equities are down ~1% in Europe. The $ES_F is actually up 40bp. Commods are generally down, incl. copper & gold. The 10year note has barely budged. It’s almost as if the Fed spending $4 trillion bonds has hampered price discovery for US T-bonds. This is one of many articles saying that Chinese equities look toppy. I couldn’t agree more, but I’ve learned the hard way that this is not a buy signal, necessarily.

The Myth of Central Bank Neutrality

I listened to this podcast in the Macro Musings series. It contrasted the styles of the Fed & the ECB and the SNB (US, Eurozone, Swiss central banks). It sort of pointed out the obvious, that CBs buying different types of assets creates winners and losers, and these are different according to what style is adopted, but that now, with asset purchases being so overwhelming, the CBs are really starting to do fiscal policy: shifting resources around between different groups in society. This should, for obvious reasons, be the remit of elected governments: nobody elects central bankers. It is a fairly dry, academic discussion, but it raises an important issue which is only going to get bigger as governments call on central banks to do more of the heavy lifting. In a number of episodes, David Beckworth has had guests who essentially make the same point: that governments should step up to the plate and do more of this work, and not rely on the Fed (usually) to bail out businesses, especially as a lot of these “pandemic loans” will never be repaid and are therefore grants in a thin disguise.