Despite good news about vaccine roll-outs, it is too early to tell when or even whether economies will fully reopen and life will go back to “normal.”
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Look at Covid-19 vaccines to gauge inflation tantrum odds
With news of another Covid-19 vaccine on its way and optimism rising ahead of the end-year holidays, it looks like 2021 will shape up to be much better than 2020.
But one forgotten danger could spoil the party: inflation. Price rises are far from investors’ minds, but an ‘inflation tantrum’ could have devastating effects on various countries’ economies if they are not kept in check.
Black box or Pandora’s box? Central bankers face dilemma
By Mirela Roman
This “like-no-other” Covid-19 pandemic is clearly a dangerously unique event, with ongoing severe economic and social consequences all around the globe. Nassim Taleb has famously described the Black Swan and more recently, BIS researchers pointed to the Green Swan in reference to the impact of climate change.
But the Covid-19 Swan is quite a combination of colours. It is an ongoing emergency situation, with fear often overcoming hope while anxiety heightens amid a decline in living standards.
A recession would threaten central banks’ independence
Central banks are again under the limelight. With Mark Carney’s departure as governor of the Bank of England next month, Boris Johnson could try to seize the opportunity to curtail the central bank’s independence.
This should not come as a surprise. Already, Johnson’s soulmate from across the ocean, Donald Trump, has been making noises about the Federal Reserve being too independent (or rather: insubordinate) for his liking.
So, if these two authoritarian populists go for central banks, what are their chances of bringing them under their rule?
Central banks enabled populism; they will soon pay the price
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.
Central banks cannot paper over the cracks of populism
Central banks are trying to prolong the decade-old bull market, but it looks like instead of reassuring investors, this makes them nervous.
What’s behind the Fed’s ‘whatever it takes’ moment
January was an extraordinarily positive month in the markets for virtually all assets, after a horrible 2018 — and it’s all due to the Fed. The US central bank executed a massive U-turn in its monetary policy and, while many observers like to point to low inflation as the reason for the Fed’s aborted effort to normalise monetary policy, something more sinister is behind it.
Rising protectionism will make us all poorer
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.
Trump signals the end of central bank independence
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.
Zombies will prevent interest rates from rising too high
For those who are afraid of zombies, the Bank for International Settlements (BIS) has some bad news: they’re on the rise. What’s more, many people may be working for zombies.
But on the flip side, zombies may spook central banks enough that they don’t raise interest rates too high.