The sense of ennui is almost overwhelming

Mint – Blain’s Morning Porridge

There are mornings when the depressing sense of ennui is almost overwhelming.

If it’s not the markets, it’s the sheer pointlessness of politics, the bureaucracies that have seized control of our lives, or the empty pit where investment banking’s passion once was.

Yesterday's murder of a promising Member of Parliament in the UK adds to the bewilderment on where we’re headed. If it proves Jo Cox’s killer was motivated by some malign sense of patriotism, her death may have some tragic meaning. Otherwise, it’s just another sign of a broken society. It’s terribly, terribly sad. Get over it.

I must man up and face the day with a steely professional eye. Markets don’t like uncertainty, so let’s find something to fix hold of. As I gaze a gazely stare out at the grim view of miserable Friday weather through the grilles of Mint Towers, what can I find to cheer myself up..?

How about the coming bond crash? Take a look at the overnight action in long Japanese Government Bonds where they crashed last night from -0.30 to -0.22. As my colleague Martin Malone points out – there is a very close correlation between super-long JGBs and global rates. The current reactive tightness of treasuries, bunds and even gilts…? Take note..

Or how about the yen – Martin points out that despite all the efforts of Abeonomics, the yen has strengthened over 20% over the last 12 months. The cumulative effect has been a collapse in the growth outlook and a stalled Nikkei. The minor uptick overnight in the Nikkei when the yen stalled simply confirms the yen is Japan.

Just as sterling will be the UK this time next week..  Probably/maybe?

Just what is wrong with the global economy? Why is it these past eight years of monetary experimentation have achieved the square root of diddly squat? Negative and zero interest rate policies are proving about as effective as “good course of leeches and bloodletting” to cure the economic ailment.

So what is the problem? We have the easiest monetary policy in history. Bill Gross has looked back over 500 years, and I’m trying to find an article I read last year that looked at monetary policy and inflationary pressures during the Punic Wars and beyond. (For those of you that studied serious stuff rather than history, that’s the Carthage/Rome unpleasantness around 300-200 BC.) These studies show interest rates have basically never been so low.

Yet the global economy remains stalled. Why? Is it because easy monetary policy benefits banks and owners of the means of production? If you look at the availability of credit across society, it is nowhere near as free. Easy money is not being accompanied by easy credit.

I’ve been ranting about this for years…even as the authorities have given banks billions via quantitative easing, they’ve restricted lending through draconian capital rules and regulation designed to solve the last financial crisis. Meanwhile, politicians have utterly failed to address burgeoning income inequality and the de facto enslavement of vast portions of the proletariat via zero hours contracts.

Perhaps that’s why we’re now seeing so much mention of “helicopter” money across the media. Folk are waking up to the reality of consumers being not only confident to spend, but having access to credit to spend. Inflation? Sorted… (Of course helicopter money is a very dangerous concept, and the unintended consequences of such mean it’s not something to try at home without adult supervision… and by adults, I’m not sure I mean central bankers…) 

What else to add to this morning’s mix…except to wish you a better weekend and a renewed sense of purpose on Monday morning...when at least we have the prospect of Gotterdammerung on Thursday (the date of the UK referendum on whether to leave the European Union).

I can’t wait. 

 

Bill Blain

Mint Partners