Turns out, nothing is selling, not copper nor battery metals nor any other commodity. Nor, for that matter, equities in general. Critically, even “risk-off” assets also look askance for bids. The mood in Denver was grim but if you really wanted to feel what it was like to have your face ripped off you might have attended a convention of UK 2-yr gilt holders. The WSJ front page thundered: “Gold losing its safe haven status”; it could have been far more broad-minded without any loss of accuracy.
The driver in all this is a Fed trying to fix four decades of monetary profligacy within a forecastable time frame, presumably before the Chairman’s tenure is up. Listening to Powell last week you got the sense that he feels that he and only he can solve this problem and that if he doesn’t, our economic future totters on the wrong side of the abyss. Accordingly, “[W]e shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be.”
The problem is that Powell has neither air force nor army. Instead, he has a single policy tool, a blunt instrument that, historically, has been effective only in places. For example, it is easy to see that Europe could raise rates to 20% and the price of gas still would not be affordable. Higher rates are also likely to increase the cost of some things. It’s not straightforward. Powell may fancy himself a Churchillian figure but a better image may be Al Pacino in the final scene of Scarface, spraying his machine gun in front of a giant pile of cocaine.
~ Doug Pollitt, "Powell's quick fix," September 27, 2022
No comments:
Post a Comment