J. P. Marín-Arrese | While betting on such firepower helped to ground the recovery, its ability to deliver a sustained boom seems less obvious.
Low growth below the 2% threshold coupled with below-target inflation has led our macros to believe that the ECB is taking extra stimulus for granted. This would mean the return of the centra banks’ asset repurchase program, experts at Morgan Stanley point out..
Juan Pedro Marín-Arrese | From the start the new Spanish government has voiced its staunch pro-European stance. A most welcome move when other core countries drift apart, either through complete withdrawal like the UK or proving a real nuisance like Italy. Not to mention some Eastern Member States waging an open rebellion by snubbing key democratic principles enshrined in the Union Treaty.
After nearly a decade of easy money, the financial markets and the economy have not just become addicted to debt, but also indifferent to the continued growth in global debt.
The ECB could first check how the market reacts to the actual halving of its purchases in January, and how the run-up to the Italian elections shape up, before changing its message.
BoAML | The last few months have been jammed with corporate bond issuance in Europe: refinancing deals, M&A supply, foreign issuers, debut names and unrated bonds, for instance. Mario Draghi spoke highly of the Corporate Sector Purchase Programme at the last ECB meeting, and we think it reflects precisely this. The central bank has been able to quickly generate corporate bond supply (and buy it), helping to counter the frustrations with low sovereign debt issuance.
James Alexander | It’s been lonely blogging that the Euro Area economy was not nearly as bad as consensus reckons, even consensus amongst our fellow Market Monetarists. But the data has consistently shown Euro Area NGDP growth doing better, and at least as good as the long-term average.
James Alexander via Historinhas | I remain a bit disappointed that Euro Area QE and negative rates are not proving more of a hit with the markets and thus the economy. But are things really as bad as painted by our friend Lars Christensen?
Benjamin Cole via Historinhas | Westerners love to hazard guesses on China and that is what they are, guesses. Even a Mandarin speaker in Hong Kong (with whom I recently conversed), with family on the mainland and employed at a large private-equity fund, professes no special insights into opaque China. But China’s central bank, The People’s Bank of China, appears to have eschewed the advice of Western central bankers, and gunned the money presses this summer. Moreover, the PBoC tactic looks to be working.
Benjamin Cole via Historinhas | The tight-money crowd is dominant in central-bank staffs, and so firmly (and self-perpetuatingly?) ensconced in such independent government sinecures that they look likely to outlast all rivals. That tight-money enthusiasts preach an increasingly dubious religion or ideology—I have dubbed it Theomonetarism—is unimportant. They have allies in media and academia, curiously always on the right-wing side of things (with some exceptions, such as Ramesh Ponnuru at National Review, James Pethokoukis at AEI, and Scott Sumner, of the Mercatus Center at George Mason University).