World Markets : The End Of Predictability ?

 

 

The blogger is a serious follower of what is happening

across the world since his early years .

Apparently he seems anxious considering the latest

developments in the geopolitical and financial front which

according to him require additional cautiousness and disrupt of

our calmness practically on everything...

   

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The Swiss currency shock has raised an awkward question many investors have been fearful of asking  :  

What if central banks become as unpredictable and fallible as they are powerful ?

The Swiss National Bank's sudden decision to abandon its 3 year cap on the franc - the cornerstone - of its monetary policy ,

led to the biggest one-day move in major exchange rates since

decades . To some it was a warning sign of other reversals  , mishaps and failures by central banks still ahead , a threat not fully appreciated by long-becalmed markets .

For decades , the power of currency-printing presses has held markets in thrall . " Don't fight the Fed , " and all its international variations , has been a devout belief among financial traders .

Even after the failure of the FED under Alan Greenspan to spot and head off one of the biggest credit booms and busts in history , the ability of the FED , Bank of England , Bank of Japan ,

ECB and others to flood their economies with money helped anaesthetize fractious markets .

The subsequent waves of cheap credit , currency pegs and quantitative easing drove down borrowing rates and erased volatility .  The power of printing money made speculation pointless . So much , so that one of the biggest conundrums of recent years became the persistently low implied volatility in markets even in the face of outsized economic , political and policy risks .

The first cracks appeared last summer , when it became clear the FED was turning off the printing presses even as its counterparts in Europe and Japan were cranking up theirs .

The idea that the world's largest economy was about to suck dollars out of the world economy just as others were pumping in 

euros and yen sent exchange rates lurching .

The power of the central banks was as daunting as ever , but no longer such a reassuring and calming influence .

   

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Recent thunderbolt from the Swiss Authorities went futher by calling into question whether central banks are as commited to their policies as they are purport to be .

Can for instance investors to be sure that bank of Denmark - facing a similar problem - of holding a long-standing krone peg to a weakening euro - will hold the line , as promissed  ?

Or , will mr Draghi will hold firm to his announcement of pooring

more than a trillion euros in the coming 18 months  to sustain the Eurozone and stave off deflation  ?

Will he even be there to see it through  ?

  

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So according to the blogger and many others , serious evolutions are happening as we speak , taking world economies

out of their ADDICTION TO CHEAP MONEY which indeed looked

like a monetary METHADONE  .....

 

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