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.
While all eyes are on Italy, the world’s second-largest economy is showing signs of trouble. China, this curious mix of communism and capitalism, is running out of steam – and ideas. Unless the Chinese government finds new ways to stimulate its economy, it might find itself facing the world’s biggest revolution.
The price growth of an “asset” into which investors everywhere around the globe have poured billions since the financial crisis has slowed dramatically, and this should worry policymakers.
Housing markets in certain developed economies are beginning to lose steam, prompting worries that house prices might see corrections, especially in countries where they had been overheating.
As the major central banks are slowly retreating from their policy of asset purchases, we will probably witness some of the side effects of this withdrawal.
Warren Buffett famously said that “Only when the tide goes out do you discover who’s been swimming naked.” The tide is going out only slowly, but we are beginning to see, at least in the UK, the damage the ultra loose monetary policy has done.
One of the main complaints of some of the “Leave” voters was that Britain is a “small island” and it is “full up.” Immigration “puts pressure” on local services such as hospitals and schools, but, most importantly, on local housing.
Even Prime Minister Theresa May, when she was Home Secretary, said immigration was putting pressure on the housing sector.
Intriguingly, however, it seems the kind of foreigner whom the UK government welcomes is the foreigner who buys homes but never lives in them – the foreign investor.
The Brexit vote must be manna from heaven for those seeking to hide their illicit gains in London. Busy with all their posturing and negotiations, politicians will have no time to curtail the criminals’ activities.
Many people hope that the UK Prime Minister’s rhetoric calling for a fairer society means she will address what is by far the biggest inequality in today’s Britain: the housing crisis. But a recent speech, in which she outlined her plan for Brexit, seems to indicate that she is unwilling to really tackle the issue.
It’s unclear when it all started, but it has reached the point where it would make the biggest banker of all times, John Pierpont Morgan, turn in his grave.
The way the markets have reacted to Brexit, you’d be forgiven to wonder what the fuss was all about.