Central Banks Policy Asynchronous-ity – A Source of New Risk

Since 2009, the key driver of financial markets has been low rates and abundant liquidity which has boosted all asset prices. The total amount of money pumped into global money markets is around US$10-12 trillion, enough to buy each person on earth a widescreen flat TV.  In the great reflation, according to one estimate, over […]

Greece’s Never Ending Troubles

The final outcome of the Greek debt crisis has been obvious from the beginning. The Hellenic nation will need to restructure its debt, writing off a substantial portion of what it owes. It may need to leave the Euro, allowing the country to devalue to regain competitiveness relative to its peers like Turkey. Spreadsheet Referendum […]

Swiss Finish: Why the Actions of the SNB are More Significant than Thought!

The fallout from the decision of the Swiss National Bank (“SNB”) to abandon a fixed value of the Swiss Franc (“CHF”) against the Euro may foreshadow the potential consequences of the end or failure of central bank activism. As Gloucester in Shakespeare’s King Lear states: “These late eclipses of the sun and moon portend no good to us “. Turning […]

My Big Fat Greek Crisis

Not since the era of Aeschylus, Sophocles and Euripides has Greek drama enjoyed such popularity. Audiences are riveted by provocative dialogue (“immoral beggar”; “fiscal water boarding”), tested themes (a Greek David versus a German and European Union (“EU”) Goliath), modish pop science (game theory) and sex (a Greek Finance Minister who attracts attention in equal […]

Reverse Oil Shock: Part 3 – Feeding Financial Instability

Financial markets have generally assumed lower oil prices are positive for asset prices, resulting from the positive effect on growth and lower inflation which extends the period of low interest rates. In reality, the large movement in oil prices has the potential to create significant financial instability. Monetary Disorder… Lower oil prices will reduce already […]

Reverse Oil Shock: Part 2 – Winners & Losers in the Energy Wheel of Fortune

The consensus view is that lower oil prices are likely to assist the global economy. Quantitative greasing will augment quantitative easing, supporting economic activity. Oil Lottery… A US$40 fall in oil prices equates to an income transfer of around US$1.3 trillion (around 2 percent of global GDP) from oil producers to oil consumers. A sustained […]