Every once in a while the truth shines through and we got a few doses of it today. Recently critics who suggested that the Fed’s QE policies artificially elevate asset prices were dismissed as QE conspiracists, but the truth is that central bank policies are directly responsible for the asset price levitations since early 2019 and well before then of course as well.
Loose money policies by central banks are goosing up asset prices. I’ve said it for a long time, others have as well despite constant pushback by apologists and deniers: No, no, asset prices are a reflection of a growing economy and earnings or so we were told.
All of this was revealed to be hogwash last year when asset prices soared to new record highs on flat to negative earnings growth and this farce continues to this day as the coronavirus is the new trigger for reductions in growth estimates yet asset prices continue to ascent to record highs following the Fed’s record liquidity injections:
But now the truth is officially out and can no longer be denied.
Here’s new ECB president Largard stating it plainly:
Sven Henrich✔@NorthmanTrader
Kudos to @Lagarde for stating the obvious:
“European Central Bank President Christine Lagarde said her institution’s loose monetary policy is hitting savers and stoking asset prices”https://www.bloomberg.com/news/articles/2020-02-11/lagarde-says-ecb-low-rate-side-effects-puts-onus-on-governments?sref=q1j4E2z1 …
Lagarde Says ECB Policy Side Effects Put Onus on Governments
European Central Bank President Christine Lagarde said her institution’s loose monetary policy is hitting savers and stoking asset prices, as she called on governments to do more to boost the economy.
bloomberg.com
Even President Trump implicitly lays it all out as he’s apparently watching every tick on the $DJIA:
Sven Henrich✔@NorthmanTrader
It’s almost as if the Fed is graded on stock market performance. https://twitter.com/realDonaldTrump/status/1227271072535498754 …
Donald J. Trump✔@realDonaldTrump
When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.
In his eyes: The Fed’s job is to goose the stock market for political purposes which he needs to have done to win re-election. It’s part of the tick box.
And don’t think that this is not exactly how we views the Fed’s role. He already told you before:
Donald J. Trump✔@realDonaldTrump
QE3, a political favor for Obama, will cause record inflation on food and fuel. This hits low income families the hardest. Big mistake.
Douglas Kass✔@DougKass
Is The Treasury buying S&P futures? @realmoney
Still the sheer admission of “stoked asset prices” as a result of central banks policies is an enormous admission. It again reflects that none of the prices we are seeing now reflect any fundamentals reality, a point Mohammed El-Erian made so poignantly this week:
Sven Henrich✔@NorthmanTrader
Reminder: The Fed, with its continued interventionist policies, has unleashed the loosest financial conditions in history. And this is the result.
Sven Henrich✔@NorthmanTrader
.@elerianm nails it:
“Markets have been conditioned to trust central banks to fomo buy every dip.
These things are so deeply conditioned in the markets that we have disconnected quite a bit from fundamentals”.*And hence we have a CB created bubble.https://twitter.com/barronsrt/status/1226892346803003398?s=20 …
barronsrt@barronsrtAllianz Chief Economic Advisor and PIMCO Former CEO and co-CIO Mohamed El-Erian joined us on the roundtable…take a listen to what he had to say!
Central bank intervention exacerbating wealth inequality ever further:
Where this all end? We can’t know, but someone already told you it won’t end well:
Donald J. Trump✔@realDonaldTrump
The Fed’s reckless monetary policies will cause problems in the years to come. The Fed has to be reined in or we will soon be Greece.
