It is becoming increasingly difficult for central banks to surprise the markets with good news. No matter how dovish they are, investors expect them to be even more dovish still. This financial repression has facilitated the rise of populist politicians, who threaten to bring the end of central banks’ independence.
When the governor of the Swiss central bank sounds alarmed, it is time to take notice. Switzerland, famous for its cheese but also for its prosperity, has built its economy around trade, and Thomas Jordan is worried that protectionism will now ruin it.
We live in such strange times that most people don’t even notice how quickly certain principles that until not long ago appeared fundamental for Western societies are being eroded.
As the US stocks bull market is now officially the longest after World War II, fears are increasing that the end is nigh for the bulls. However, the approach of the US mid-term elections in November might mean not just that the bull market could continue, but also the end of the emerging markets rout.
Remember when Donald Trump hinted that he would threaten to restructure the US debt to get better terms on it? His protectionist measures may “help” him to achieve some sort of restructuring, but not in a good way.
“You see, no hope’s a dangerous thing.”
— W.A.S.P. “My Tortured Eyes”
Last year’s Brexit vote and the election of Donald Trump as president of the U.S. shook the world out of complacency and sent analysts and experts into a frenzy of attempts to explain what was behind these two events.
For Trump’s election there is the partial explanation of the Russian intervention. For Brexit, the fact that the tabloid newspapers have, for years, portrayed Eastern Europeans as benefit scroungers who at the same time “steal” jobs from the British may have played a role.
But what about the rest of Europe?