Central Banks Out of Bullets Fantasize About Powers They Don’t Possess

by Danielle Park
Juggling Dynamite

Fed Chair Yellen and her colleagues are fantasizing about ‘running the economy hot’. As if central banks at zero rates, had that kind of power.

The trouble is that a secular downturn in global demand–caused by debt hangover, years of malinvestment in non-productive assets, aging demographics and low yields–are thwarting hopes and dreams of inflation topping 2%+. This is not the good old days, when plain old cutting rates spurred more consumption. Today low yields are having the opposite effect–causing people to spend less and save more.

The bond sell off in the past month, has created another buying opportunity for the highest quality North American credits (ie., government issues 1-10 years).

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