Cumberland Advisors’ David R. Kotok talks about negative interest rates, NIRP, and says the European Central Bank’s (ECB) Christine Lagarde has a difficult task right now. He also discusses China, the pork shortage, and the impact of viruses on the global food supply. Running time 25:02, David is introduced at the 10:45 mark – Play […]
Negative-interest-rate policies (NIRP) have been criticized by some (me included) and pursued by others, including Europeans aligned with former European Central Bank (ECB) president Mario Draghi. However, growing numbers of Europeans are becoming disenchanted with NIRP, and some are now shifting away from it. In our view, negative rates have, predictably, damaged growth for over five years. The ECB’s new president, Christine Lagarde, seems to understand that she faces a daunting task in extricating ECB policy from reliance upon negative rates.
Here is an excerpt from her first speech:
“In my view, since our challenges are common ones, we must meet them with a common response. This involves moving towards a new European policy mix, which has a number of key elements. The first is monetary policy, which I start with because it is my area of responsibility and which will undergo a strategic review due to begin in the near future.”
Hat tip to Kevin Humphreys for the reference. Kevin is manager, European money markets, for BGC Partners. He is based in London. Kevin has kindly given us permission to share his observations with our readers. We completely agree with his view.
“Having had a few references of late from board members to potential side-effects of European Central Bank monetary policy, it was perhaps of little surprise that the ECB in their financial stability report should highlight that sub-zero interest rates have forced large investors to take on more risks and businesses to take on more debt. Equally unremarkable were the other two main observations, that bank profitability prospects have weakened and that mispriced assets may represent a vulnerability.
Following the FOMC’s announcement of its third consecutive rate cut after its meeting this week, speculation immediately broke out among market participants about whether additional cuts or even rate increases might be on the horizon going into 2020. However, such speculation is probably more noise than substance at this point, since the Committee’s statement was […]
Bloomberg TV – Daybreak Asia October 30, 2019 Robert Eisenbeis, vice chairman and chief monetary economist at Cumberland Advisors, discusses the potential for another Fed rate cut in December and beyond and his thoughts on communication from the central bank. He speaks on “Bloomberg Daybreak: Asia.” (Source: Bloomberg) WATCH HERE (or click the embedded […]
As a follow-up to David Kotok’s piece last week on taxing wealth (https://www.cumber.com/cumberland-advisors-market-commentary-wealth-tax/), it may be useful to remind readers what the potential incentive effects might be when it comes to the implications of wealth tax proposals to tax wealth may have on entrepreneurs and business structures. Proponents of a wealth tax are motivated by […]
We wrapped up our Labor Day Camp Kotok with a round of excellent on-the-record discussions that we’re happy to share with you here. David Kotok and Charles Plosser at Camp Kotok: The Challenges Facing Central Banks David Kotok and Christopher Whalen at Camp Kotok: Capital Markets, Debt and Deflation David Kotok and Doug Duncan at […]
“Americans will always do the right thing — after exhausting all the alternatives.” Winston Churchill? Abba Eban? An Irishman? Apocryphal? For a history of the quote, see: https://quoteinvestigator.com/2012/11/11/exhaust-alternatives/ . When it comes to interest rates, inflation, and financial markets, that hopeful outcome is being sorely tested. We’ll look at some current evidence of US economic trouble […]
The FOMC decided to throw a pass by cutting rates; but given the market’s response, it looks like they were tackled for a loss. In Woody Hayes’ parlance, the one positive of a forward pass turned into a negative. Powell attempted to offer three justifications for the policy move: to insure against downside risks, to […]