Friday, May 27, 2016

The Federal Reserve's 
Own Mechanism May Be Broken
Yra Harris & Gordon T Long* discussion .. There is a dynamic in play in the global markets. With the vast amount of central bank purchases, they have skewed the markets so badly that the markets are trying to get a read on what this all means. Because everything is relative value, 60% of the developed market bonds are in negative territory. That skews everything, so we can’t get a real feel for what this curve means. If that’s the reason the curve is flattening, then we’re in a whole new ballpark because it’s a global phenomenon at a level we’ve never seen before and that’s going to affect everything. It breaks the Fed’s own mechanism .. "Bond markets need to be a signally mechanism to be effective, and if you’ve broken the signalling mechanism, well, we’re flying here in uncharted territory… then it becomes a question of, who’s in the pilot’s seat?" .. Harris thinks the G7 meeting will speak to the "Larry Summers Agenda" - global fiscal stimulus spending on infrastructure .. 32 minutes

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