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Central Banks - The New Nukes?

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You know something is strange when "the riskiest" country in the world is the nation whose central bank everyone is relying on to 'save the world' and "the safest" stock market in the world is from a nation whose neighbor is actively test-firing nuclear missiles? It appears activist central banks - following Draghi's "kitchen sink" - have become the new normal's 'nukes'.

 

As Goldman notes, Brazil & Japan vol is highest and Korea lowest on %-ile basis

 

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Mises' Ryan McMaken warns,

 

The obsession with deflation among central banks is leading them to try the same thing over and over again with nothing to show for it, but continued economic stagnation.

 

 

 

On the other hand, an interesting thing is happening. As the ECB and the Bank of Japan have loosened the easy-money spigot even more, their respective currencies have actually gained on other currencies. The reasoning is apparently that the latest moves represent the bottom to how low the central banks are willing to go. That is, investors are betting that after this, the central banks will start to tighten.

 

 

 

Maybe. But we’ll see.
Right now, we’re only talking about “bazookas” and “kitchen sinks.” We haven’t even started talking about “heavy artillery” or “going nuclear.”

 

 

 

It ain’t over ’til it’s over, and as George Magnus wrote today, “helicopter money” may be next:
“If today’s kitchen sink episode ends with a whimper, as seems likely, and governments continue to stand aside from the economic fray, Europeans may demand still more of their central bank.”

 

How does this end well?

 

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