central banks ECB fed Markets volatility

The Central Bank Put Is Still There, But ‘Politicians’ Implied Vol.’ Has Exploded

February 1, 2019

In hindsight, January may well be remembered as the month when monetary policy makers ushered in a n

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3 thoughts on “The Central Bank Put Is Still There, But ‘Politicians’ Implied Vol.’ Has Exploded”

mfn

February 1, 2019 at 3:07 pms Log in to Reply

Depending on your penchant for hyperbole, you can call this central banks being “boxed in” by their enabling of explosive debt dynamics which now necessitates a perpetual effort to keep rates vol. suppressed, or you could call it “careful management” on the way to an painstakingly slow exit from accommodation.

Door B, please.

Volcker showed us that the Fed can kill inflation “overnight.” It would hurt, a lot, but dead it would be. Inflation is not the concern. Deflation is. Which means the prudent course with respect to the global debt bubble is to unwind very slowly.
1. Anonymous
  
  February 1, 2019 at 3:32 pms Log in to Reply
  
  Agreed. From a “risk management” standpoint, better to err on the side of accommodation, given the relative availability of tools in the toolbox to fight inflation versus those left in the box to fight deflation.
2. Josh
  
  February 1, 2019 at 5:55 pms Log in to Reply
  
  Go back and look at the chart of non-fin credit to gdp, that bubble is not “unwinding”. It is a paradox as the only way to unwind is to inflate, but to inflate would be to pull back the curtain. The best we can hope for is the perpetual muddle of the last decade.