Folks, it’s a tyranny of the PhDs. Recently, the central bank of Sweden was subject to a withering tirade by that oracle of Keynesian rubbish, professor Paul Krugman, who accused it of “sado-monetarism” for leaving the Swedish economy exposed to the mythical economic disease of “deflation”.
So the Riksbank threw caution to the wind, and a few months ago joined the global central bank plunge into ZIRP and promised to ladle out free money until at least 2016. To leave no doubt, it is currently cranking up for direct lending, “asset purchases”, negative interest rates (N-ZIRP) and the rest of the recently invented central bankers voodoo kit. Anything to achieve its sacred 2% inflation target!
So still another central bank has been infected by the 2% inflation shibboleth—-a folly the greatest central banker of our era dispatched recently with a single sentence:
Mr. Volcker,who believes the Fed’s main goal is to defend the dollar’s stability, said he doesn’t even understand why the Fed adopted a 2% target for inflation. He asked, “Do we want prices to double every generation?”
Creator of Stammered Works Becomes EU’s Red Tape Whacker
The European Commission seems to be serious about wanting to cut some of the mountain of red tape it has imposed over the years. Only a truly giant weed-whacker can be expected to do the job. In our paperless age, it would probably be best if someone just walked past their servers with a very big magnet.
Anyway, Reuters informs us that JC Juncker has found the right man for the job: former Bavarian premier Edmund Stoiber. We have previously remarked that jobs in the EU are sinecures for political has-beens, and one might at first suspect that to be the case here as well. However, Stoiber actually does appear to be qualified for the task – at the very least, he seems well prepared for it and comes equipped with the proper mindset.
“European Commission President Jean-Claude Juncker appointed Germany’s Edmund Stoiber as special adviser on better regulation on Thursday, to help the EU executive fight over-regulation and red tape.
Stoiber, a former premier of the German state of Bavaria who sought to become German chancellor in 2002, has for the past seven years chaired a group advising the Commission on administrative burdens and on how to make EU law simpler and cheaper.
In October, he proposed exempting small- and medium-sized firms from a wide range of business rules with a “bonfire of red tape” aimed at reversing a public perception of Brussels as a “bureaucratic monster”.
“EU citizens need the EU to focus on where it can make a real difference to their lives, not to interfere in every detail. EU businesses need the space to innovate and grow, not get tied up in red tape,” Juncker said in a statement
Stoiber will work closely with Juncker’s deputy, First Vice-President Frans Timmermans, who is also charged with improving regulation.
The stock market takes off in holiday celebration of the FOMC being even less clear than it really has been in some time; perhaps going all the way back to Alan Greenspan’s intentional mush. Equity “investors” are happy that the Fed may be happy about the economy, even though there is nothing in actual markets (outside of stocks) to suggest that anything the Fed proclaims carries even the slightest validity. Growth and inflation are going to be good, so the philosopher kings in DC say for the sixth year in a row, this time enough to end ZIRP (after almost seven years) and get to tightening.
Axiomatically, ambiguity is not certainty but the degree to which ambiguous language is taken as a comfortable conviction shows exactly the game being played here. Stock investors expected this exact vagueness and since the received abstruseness was as expected it was certainly reassuring to bid equity prices. This is how far rational expectations theory has devolved.
It is very curious, then, to see vastly larger markets unperturbed by anything that occurred at the FOMC this week. Sure, nominal yields rose in the treasury market a bit, though only slightly after an immense buying spree. Overall there was a distinct lack of distinction, and thus positive conviction, in credit and funding. The eurodollar market is only slightly tighter in the shorter tenors to where it was before the FOMC’s “radical” and “revolutionary” semantical modification.