Central banks are the master of financial disaster

Another big swing day in global markets as HFT traders go wild and the media hangs on every syllable of central bank speak.

The global sell off to date has been vicious and abrupt and as usual, has knocked most participants off balance. It is entirely typical that we could see a bounce back of some duration; but cash remains scarce and bets heavily levered.  The secular bear is not dead yet.

A decline of just 10% in US stocks was enough to make Fed members start talking about rate hike delays again this week. As if a .25 rate move either way matters a wit in supporting anything meaningful at this point. Chinese stocks that have crashed 50% since June, managed to rally a bit in the last hour of trading as the People’s Bank stepped in to try and calm nerves before a public parade. Lest we the lose the plot here, central banks are the problem, not the solution. They have created a monster of over-valuation, capital mis-allocation and moral hazard worldwide. Fortunately not everyone has lost their mind.

Jim Grant, founder at Grant’s Interest Rate Observer, speaks with Olivia Sterns about the role played by the Federal Reserve in recent market turmoil.  Here is a direct video link.

Capital Dynamics Chief Executive Officer Tan Teng Boo discusses the China stock rout and why he’s predicting another global financial crisis. Here is a direct video link.

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