Daily Note

Wanted: Money

Jul 22, 2019

Thomas Thornton

Today's note is about money.  Central Banks and governments have a put out a help wanted ad:  "Wanted:  Money"   The markets around the world have done well so far this year which includes the bond markets and some areas in the commodity markets.  However, the way politicians and central bankers are talking, the world need more money immediately to keep it going in order not to cause a catastrophic collapse.  We know the Fed is now 100% certain it's going to cut rates 25bps as 50bps seems off the table and this week the ECB should announce 1) a redefinition of the inflation target 2) an inflation threshold for raising rates and/or QE 3) changes in QE program design to allow the ECB to lower rates across the eurozone without driving bund yields to severely negative levels, and 4) purchases of bank debt – with the first three in particular standing a decent chance of being adopted.   Larry Fink of Blackrock who has said near every recent top and pullback "People are not invested enough in stocks" has now said the ECB should start buying stocks to stimulate the eurozone.  Larry Fink has a vested interest in seeing stocks go up obviously and considering the Bank of Japan has been buying stocks in the open market without any success, it might sound good in the short term but ultimately it's not good for the long run.  

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