FX Hell In Hotel California

At the recent World Economic Forum
“Central banks, said Harvard University economics professor Kenneth Rogoff, are surely the greatest source of uncertainty in the eyes of the financial markets..”  http://www.spiegel.de/international/business/ecb-decision-to-weaken-euro-comes-with-pluses-and-minuses-a-1015322.html

I think the new Greek Prime Minister nailed it when he likened the situation to Hotel California. He was,of course, describing the situation of Greece stuck in the Eurozone which has nothing to do with him and entirely not his fault but has become his responsibility, as the present and near future leader of Greece.

Keynes aside, I prefer a recent article out of The Economist on how Adam Smith, the father of modern economics, would view the present situation that the entire world is mired in.

Yes, for no longer is it a case of individuals but that of a collective whole as the world has moved into a state of interdependency that is like Hotel California.

” the temptation of governments to meddle at long-term cost to society; the dangers of paper money; and how the issues of debt and money shift wealth from the future to the present. That, he thought, constitutes a form of generational theft.” http://www.economist.com/blogs/freeexchange/2015/01/bringing-dead-economists-back-life?fsrc=scn/tw/te/bl/ed/adamsmithonthefinanialcrisis

Why is it that the big 4 central banks (Fed, ECB, BoJ and PBoC) and to a certain extent, the other majors like RBA, BoC and RBNZ, are able to print to their heart’s content but the rest of the world better not even think about it ?

It is not as if they are enjoying large current account or budget surpluses. It is just because they are TOO BIG TO FAIL as countries and it is alright that US’s national debt has topped $18 trillion, a long running deficit.

We are in an era of unconventional monetary policies. No laissez faire and the madness continues with the ECB now committing to buying a trillion dollars worth of mostly negative yielding bonds which apparently does not have a PnL impact.

Because it is also the new age of forex trading, suffering the low yields for the bigger  benefit of foreign exchange gain, a case that CNBC is promoting now. http://www.cnbc.com/id/102374260

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