Jens Weidmann Has Left The Building
Jens Weidmann resigned as Bundesbank President today, effective December 31.
Some years ago, when I endeavored to speculate on the "real" reason for the resignation of another central banker, an old friend familiar with the situation gently advised me to refrain. It's never, he said, a good idea to speculate about such things. When someone cites "personal" reasons for leaving their post, best to leave the speculation and any accompanying snide commentary to people from whom such things are expe
I really appreciate your insights and analysis.
When I started seriously investing about 7 years ago, I never imagined that I would ever view investing as an activity backstopped by the Central Banks of the world.
Now, it seems it is a fait accompli (a thing that has already happened or been decided before those affected hear about it, leaving them with no option but to accept it).
What I would really like to understand is how widely held is this view (there is no going back on fiscal-monetary partnerships) among the professionals who control the trillions that are invested in stocks and bonds?
Almost everyone or only a relatively small group?
My guess is that the larger the AUM for the big pros, the more inertia is created preventing any real “bloodless” flexibility for future actions. H makes a subtle but critical observation when he posits the idea of the CB (Fed or other) buying equities to manage and distribute to the public over time. Once started, I firmly doubt such a practice could ever be allowed to stop. The BOJ, as I remember the last data I saw, controls (beneficially owns) well over half the stocks of Japanese companies — at a notable unrealized gain shown here. Trouble is, they probably can’t realize this gain because of the negative effect it would have on Japanese stock prices. It would seem they are well and truly “stuck” in a policy/strategy “tar baby” and have no real way out.
The vexing thing is that a lot less of that commandeering would be necessary if we (well, the US population) still had the political will to tax the rich and to unwind some excesses when it comes to cost inflation in specific sectors like real estate, higher ed and health care…
H…This one is a must read..It is really a great 30,000 foot look at the Topography of Modern Markets . Sometimes it just pays when we don’t listen to even a good deceased friend because this post benefits a lot of others who ponder these changes of the last decade and their impact on the future of investing. Thanks !
I was hoping your article would not end on that last line. I’m guessing that the difference between regretting his decision and “immensely” regretting his decision, is that she wanted to convey some degree of sincerity in her statement. I just don’t know why. I don’t know enough about the dynamics there. It doesn’t seem like the two were philosophically aligned. Does Lagarde see herself as someone who forges compromises, and wants a hawkish viewpoint to balance other views? Or is she hoping that he will be less vocal in future criticism once he is a private citizen? Or something else?
So China, Japan, Europe, and the US are all committed to a form of state capitalism?
“I’ve variously suggested that over time, central banks might begin to view equities as a public good, purchasing them and then simply distributing them to the public. That would solve the most vexing problem with central bank stock-buying — namely, how to unwind holdings given stocks don’t “mature” and thus can’t “roll off.” Such a buy-to-distribute program could run in perpetuity, ensuring stock prices generally rise, with allowances for individual companies to fail and defined bands for intraday volatility.”
But wouldn’t the ‘public’ just sell it so they can use the money for more useful things, given it yields nothing, thus then putting even more pressure or the bond prices?
Equities. Not bonds.
At what point do we (market) account for this debt monetisation and therefore devalue the currency accordingly? This can’t go on forever whether it is done via central banks buying bonds or helicopter money or … or… it will have to impact the currency at some point.
Has it not occurred to you that maybe it can go on forever? Or at least “forever” as far as you’re concerned and I’m concerned and the next two generations are concerned? All fiat money is worthless by definition. The dollar is just a shared myth. Faith is what sustains it. The idea that hyperinflation “must” ensue “at some point” is patent nonsense.
Ask someone parroting that to give you a date and then listen to them stutter and fall back on something about how much purchasing power the dollar has lost over a century. Then say “But you didn’t answer my question. When is hyperinflation coming? What’s the date? What is the breaking point? Can you quantify it for me? Where is the rule?”
All you’ll get is condescending eye rolls and sighs, except the joke isn’t on you, it’s on them, because they’ll still be waiting on hyperinflation and penning silly blog posts about gold when they’re 90. Or they’ll throw up their hands and retire in their mid-50s.