Friday, September 05, 2014

What Mario Draghi Really Did

Related story: In Shocking Move, ECB Cuts By 10 Bps, Sends Deposit Rate Further Into Negative Territory

Hoosier's note: From what I have gathered so far, this is the scenario we are witnessing as far as central banking policies are concerned,

PBOC - China - sometimes Hawkish, sometimes Dovish
Fed - US of A - Hawkish
Eurozone/EU - ECB - Dovish
Japan - BOJ - Dovish

Hawkish - Tightening policy; Dovish - Loosening policy, i.e., print more money.

It is absolutely clear to me that the Fed will tighten, by raising rates, possibly in the middle of 2015.

The ECB and BOJ are busy fighting "Deflation" and hence they will continue to print more money. In this way, the policy actions by the ECB and the BOJ will negate the negative impact on the equity markets of the Fed's action to raise rates.

China, on the other hand, is in a world of its own, or in the best of both worlds (pun intended), for it can either tighten or loosen as it sees fit in response to external pressures, arsing from the policy actions of other Central Banks (Fed, ECB, BOJ), for example, while containing its financial problems domestically.

In conclusion, I don't see any Market Crash until the 2016 US Presidential Election although intermittent market corrections are to be expected.

BUT, I will bet, with every single cent that I have, that we will experience a Financial Crisis during Janet Yellen's tenure as Fed Chair,

Read: A crisis in the making?