iftttwall

In what appears to be a Doha party-pooping statement, Saudi deputy crown prince Mohammed bin Salman stated unequivocally that The Kingdom won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha. This a major problem because – if you remember – this week's melt-up in oil (and thus stocks) was predicated on an anonymous diplomat cited by Interfax saying a deal will get done without Iran (which the Russians refused to confirm). All that hope crushed by a reality that has been painfully obvious that no side will be given in the Iran-Saudi tete-a-tete… and now, as Citi warned "expect a sharp sell-off."

 

As Bloomberg reports, the world’s biggest crude exporter would cap its market share at about 10.3 million to 10.4 million barrels a day, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family.

“If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force.

Adding – rather pointedly that…

“If we don’t freeze, then we will sell at any opportunity we get.”

 

“If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” Prince Mohammed said. “But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.”

 

Prince Mohammed also said that Saudi Arabia isn’t concerned because “we have our own programs that don’t need high oil prices.”

Simply put, "no deal," given Iran is sending a junior minister in a clear message that it will do nothing.

It seems more than a few people "knew" nothing would come of this and that the epic squeeze-fest early this week was all false…

 

 

As Citi warned earlier,

If there is no agreement, then expect a sharp oil market sell-off on Monday. If there is an agreement in name but market participants realize it has no teeth, except a slower sell-off. Main oil-producing countries, but especially Russia, have been stirring the market since late 2015 with talks of a potential agreement and the market has responded frequently, creating periodic froth to prices, only to see prices come off when no agreement has been forthcoming. Money manager net (and gross) length is around record highs on ICE Brent, giving some scope for position liquidation following any ‘disappointing’ headlines and adding to downside risk.

At this rate we may not even get a "gentlemen's agreement" over efforts to freeze production… and Sunday night will be a bloodbath!!

.@zerohedge http://pic.twitter.com/lEkAqHT6GR

— StockBoardAsset (@StockBoardAsset) April 15, 2016

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Submitted by Doug Casey via InternationalMan.com,

I give a good number of speeches each year. For some time I've asked audiences a question: "What useful purpose does the U.S. government serve?" I do that not to be challenging or provocative, but to actually find out if anyone else can think of a useful purpose the government serves. The question at first shocks, then amuses and then perplexes almost everyone because it is both so obvious and outrageous that no one ever thinks of asking it. Most people accept the institution of government because it has always been there; they have always assumed it was essential. People do not question its existence, much less its right to exist.

Government sponsors untold waste, criminality, and inequality in every sphere of life it touches, giving little of value in return. Its contributions to the commonweal are wars, pogroms, confiscations, persecutions, taxation, regulation, and inflation. And it's not just some governments of which that's true, although some are clearly much worse than others. It's an inherent characteristic of all government.

THE NATURE OF THE BEAST

The essence of something is what makes the thing what it is. But surprisingly little study of government has been done by ontologists (who study the first principles of things) or epistemologists (those who study the nature of human knowledge). The study of government almost never concerns itself with whether government should be, but only with how and what it should be. The existence of government is accepted without question.

What is the essence of government? After you cut through the rhetoric, the doublethink, and the smokescreen of altruism that surround the subject, you find that the essence of government is force…and the belief it has the right to initiate the use of force whenever expedient. Government is an organization with a monopoly, albeit with some fringe competition, on the use of force within a given territory. As Mao Zedong said, "The power of government comes out of the barrel of a gun." There is no voluntarism about obeying laws. The consent of a majority of the governed may help a government put a nice face on things, but it is not essential and is, in fact, seldom given with any enthusiasm.

A person's attitude about government offers an excellent insight into his character. Political beliefs reflect how a person thinks men should relate to one another; they offer a practical insight into how he views humanity at large and himself in particular.

There are only two ways people can relate in any given situation: voluntarily or coercively. Almost everyone, except overt sociopaths, pays at least lip service to the idea of voluntarism, but government is viewed as somehow exempt. It's widely believed that a group has prerogatives and rights unavailable to individuals. But if that is true, then the Ku Klux Klan (KKK), the Irish Republican Army (IRA), the Palestine Liberation Organization (PLO) – or, for that matter, any group from a lynch mob to a government – all have rights that individuals do not. In fact, all these groups believe they have a right to initiate the use of force when they find it expedient. To the extent that they can get away with it, they all act like governments.

TERRORISTS, MOBS, AND GOVERNMENTS

You might object that the important difference between the KKK, IRA, PLO, a simple mob and a government is that they aren't "official" or "legal."

Apart from common law concepts, legality is arbitrary. Once you leave the ken of common law, the only distinction between "laws" of governments and the "ad hoc" proceedings of an informal assemblage such as a mob, or of a more formal group like the KKK, boils down to the force the group can muster to impose its will on others. The laws of Nazi Germany and the U.S.S.R. are now widely recognized as criminal fantasies that gained reality on a grand scale. But at the time those regimes had power, they were treated with the respect granted to any legal system. Governments become legal or official by gaining power. The fact that every government was founded on gross illegalities – war or revolt – against its predecessor is rarely an issue.

Force is the essence of government. But the possession of a monopoly on force almost inevitably requires a territory, and maintaining control of territory is considered the test of a "successful" government. Would any "terrorist" organization be more "legitimate" if it had its own country? Absolutely. Would it be any less vicious or predatory by that fact? No, just as most governments today (the ex-communist countries and the kleptocracies of the Third World being the best examples) demonstrate. Governments can be much more dangerous than the mobs that give them birth. The Jacobin regime of the French Revolution is a prime example.

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On the one hand…

 

 

Source: Townhall.com

One can't help but look at the current debacle and consider whether, just as we warned, The Cloward-Piven strategy is reaching a pivotal moment…

In the mid-sixties at the height of the “social revolution” the line between democratic benevolence and outright communism became rather blurry. The Democratic Party, which controlled the presidency and both houses of Congress, was used as the springboard by social engineers to introduce a new era of welfare initiatives enacted in the name of “defending the poor”, also known as the “Great Society Programs”. These initiatives, however, were driven by far more subversive and extreme motivations, and have been expanded on by every presidency since, Republican and Democrat alike.

 

At Columbia University, sociologist professors Richard Cloward and Francis Fox Piven introduced a political strategy in 1966 in an article entitled 'The Weight Of The Poor: A Strategy To End Poverty'. This article outlined a plan that they believed would eventually lead to the total transmutation of America into a full-fledged centralized welfare state (in other words, a collectivist enclave). The spearpoint of the Cloward-Piven strategy involved nothing less than economic sabotage against the U.S.

 

Theoretically, according to the doctrine, a condition of overwhelming tension and strain could be engineered through the overloading of American welfare rolls, thereby smothering the entitlement program structure at the state and local level. The implosion of welfare benefits would facilitate a massive spike in poverty and desperation, creating a financial crisis that would lead to an even greater cycle of demand for a fully socialized system. This desperation would then “force” the federal government to concentrate all welfare programs under one roof, nationalize and enforce a socialist ideology, and ultimately, compact an immense level of power into the hands of a select few.

 

…

 

The tactic can only decrease wealth security by making all citizens equally destitute. As we have seen in numerous socialist and communist experiments over the past century, economic harmonization never creates wealth or prosperity, it only siphons wealth from one area and redistributes it to others, evaporating much of it as it is squeezed through the grinding gears of the establishment machine. Socialism, in its very essence, elevates government to the role of all-pervasive parent, and casts the citizenry down into the role of dependent sniveling infant. Even in its most righteous form, Cloward-Piven seeks to make infants of us all, whether we like it or not.

Equality through universal dependence.

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Submitted by Pater Tenebrarum via Acting-Man.com,

Economic and Demographic Changes

We have discussed China’s debt and malinvestment problems in these pages extensively in the past (most recently we have looked at various efforts to keep the yuan propped up). In a way, China is like the proverbial “watched pot” that never boils though. Its problems are all well known, and we have little doubt that they will increasingly find expression. China’s credit bubble is one of the many dangers hanging over the global economy’s head, so to speak.

 

China’s narrow money supply M1 – the money side of the ledger, which is a reflection of China’s enormous credit expansion. The recent spike higher has begun to reverse noticeably in February, with M1 falling back to roughly the level of November 2015 – click to enlarge.

However, as we are also fond of stressing, it seems to us that many outside observers are making the mistake of underestimating the strong entrepreneurial spirit of China’s people. In addition, there is a lot of focus on the many ways in which China’s government is faking data to make things appear better than they are (something it has in common with all other governments, only it is more brazen about it), but perhaps not enough focus on what is not known about China’s economy.

In other words, there may still be components of economic growth in China that are underestimated, simply because the data that are currently available are not comprehensive enough. It is after all a giant country, and in spite of being run by an authoritarian regime, it has in many ways a lot more economic freedom than the regulatory socialist democracies of the West. Economic freedom and slightly deficient statistics are often related, since the main reason for the State to gather such statistics at all is to provide itself with justifications for meddling with the economy.

 

Sir John James Cowperthwaite, the former governor of Hong Kong, famously refused to even collect unemployment statistics – on the grounds that they would merely tempt the government to meddle with the economy. He was of course 100% correct and Hong Kong’s economic success under his stewardship proved it in spades.

 

Nevertheless, it is clear that China’s economy is on the verge of profound change, and it is likely that this change will involve a lot of economic pain as it implies that the capital malinvestments and unsound debt amassed in recent decades (and especially since 2009) will have to be liquidated.

One of the things impelling change in China is actually a result of its very success: hundreds of millions of people have been lifted from abject poverty to middle class status. In recent years, wage growth in China has been enormous, and a side effect of this is that China’s days as the global manufacturing powerhouse are now coming to an end.

At least this is true of labor-intensive production activities, which are these days increasingly shifted to South-East Asian countries in which wages remain far lower. Some Chinese companies have even begun to import foreign workers from countries like Vietnam to counter the pressure of rising wages on their bottom line.

At the same time, China has passed a significant demographic milestone: last year it has joined the world’s “graying societies”. In China’s case this is a lagged effect of the infamous (and utterly nonsensical) “one child policy” adopted by the government in the 1980s. China’s central planners have made the grave mistake of believing the scarcity and overpopulation fear mongers and as a result have created a real problem, one which could have been easily avoided by simply not meddling.

 

China’s and Japan’s working age population, actual and forecast. In China the inflection point from growth to decline occurred last year – click to enlarge.

 

Migrating Back to the Sticks

One of the results of the downturn in China’s manufacturing industries is that rural workers who migrated to the cities in their hundreds of millions in recent decades are increasingly migrating back to their rural homes. We don’t think this is all bad, as they are bringing their newly-won expertise back to places that are basically backwaters at the moment and might actually benefit from this influx of know-how.

However, it does have implications for China’s egregious real estate bubble and its countless “ghost cities”. These seem now destined to remain ghost cities, and as such represent the biggest overhang of malinvested capital in all of human history. China has experienced a version of Keynesian pyramid building that truly dwarfs anything that has ever been seen before.

 

Empty streets and empty high-rise apartment buildings for as far as the eye can see – China’s infamous “ghost cities”.

 

The Financial Times has recently produced a short video on the phenomenon of older rural workers deciding to leave the cities and going back to their rural homes as job prospects in the manufacturing sector dwindle. The video is entitled “The End of the Chinese Miracle” and not only presents the broader macro-economic perspective, but also shows viewers how individuals are coping with the problem.

As we have noted above, we do not believe this is all bad – after all, change had to happen at some point, and delaying it further would only exacerbate the problems. However, China’s enormous debt and malinvestment bubbles do suggest that this will lead to noticeable economic disruptions with important implications for the global economy.

The End of the Chinese Miracle

 

Conclusion

One should not underestimate the market economy’s ability to adapt to change. However, this includes the occasional hicc-up, as the mistakes of government intervention need to be periodically corrected. Since modern-day “policymakers” are averse to allowing even the slightest bit of economic pain to materialize (except if the countries concerned are small and helpless, such as Greece), they have implemented unprecedented monetary pumping and debt expansion to hold recessions at bay.

China’s planners have been especially diligent in this respect, misallocating resources in truly grand style and leaving the country buried in a pile of unsound debt. The combination of demographic and economic challenges the country now faces means that more than just a small hicc-up is probably in store, even though the timing of the denouement remains uncertain.

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Two weeks ago we showed something striking: while combing through Janet Yellen’s recently disclosed daily diary, we noticed that on February 11 and 12, the Fed chair held two critical phone calls, one with BOE governor Marc Carney and the next day, with BOE president Mario Draghi.

 

But what was especially shocking, and the reason why we dubbed them “the phone calls that saved the world“, is that the first call took place quite literally the very hour that the market hit its 2016 lows.

 

Zoomed out:

 

We asked if thanks to Yellen’s diary we got “the closest glimpse of Keyser Soze the global Plunge Protection Team communication by phone call?” before concluding that “only the NSA knows.”

This was not enough for one of our readers who decided to find out more and as a result, he sent a FOIA request to the Fed on the day of the post, in which he requested the audio file or any documentation of the nature of the telephone call between Yellen and Carney and, subsequently, Draghi.

The Fed’s response: a resounding “no”, for the following reason: “the responsive document contains nonpublic commercial or financial information” and while “the document containing the exempt information was reviewed… no reasonably segregable nonexempt information was found.”

Case closed.

  Of course, if the phone contains the information many suspect it does, then the Fed is probably wondering why is someone so naive as to ask how the sausage is made when they can just BTFD and live happily ever after.

More seriously, when the Fed parades around with its “transparency” it clearly has this in mind.

 

But when it comes to truly important things like the content of a phone call that may very well have prevented the market from collapsing, well you better work at Goldman Sachs to get that particular confidential Fed data…

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The massive magnitude 7.3 earthquake that struck Japan this afternoon, the strongest since the devastating quake of 2011, took place at night local time, and as such there was little available media coverage. As Japan wakes up, much of the destruction becomes apparent.

As Reuters reports, the quake has killed at least one person, injuring hundreds and bringing down buildings, citing media reported, just over a day after a quake killed nine people in the same region. The Japan Meteorological Agency initially said the Saturday quake was 7.1 magnitude but later revised it up to 7.3.

The authorities warned of damage over a wide area, as reports came in of people being trapped in collapsed buildings, fires and power outages. Residents living near a dam were told to leave because of fears it might crumble, broadcaster NHK said.

Saturday’s tremblor triggered a tsunami advisory, although it was later lifted and no irregularities were reported at three nuclear power plants in the area, a senior government official said. People still reeling from Thursday’s shock poured onto the streets after the Saturday quake.

The Nuclear Regulation Authority said no abnormalities were found at the Sendai nuclear plant, where the only two of Japan’s 43 reactors are online. NHK video showed stones tumbled from the walls of historic Kumamoto Castle, and a wooden structure in the complex was smashed, adding to damage from Thursday’s quake.

Kyodo news agency said one person was confirmed dead. NHK reported that nearly 400 people were being treated in hospitals, but that figure included “people who don’t feel well”, so it was not clear how many serious injuries there were. Media reported fresh damage, including collapsed buildings and roads. A fire erupted in a what appeared to be an apartment building in Yatsushiro city, while some people were trapped in a nursing home in the town of Mashiki, according to NHK.

The epicenter of the quake was near the city of Kumamoto and measured at a shallow depth of 10 km, the U.S. Geological Survey said. The entire city of 730,000 was without power.

Prime Minister Shinzo Abe, arriving at his office, told reporters the government was making every effort to determine the extent of the damage, carry out rescue and recovery, and to get accurate information to citizens.

“There is a great possibly that the damage will spread widely so we must give it our all to gather the information on the damage situation and make the rescues and relief. We would also make sure to relay the situation to the people. Those were my orders for now.”

The earthquake on Thursday evening in the same region was of 6.4 magnitude and experts said the two tectonic events could be linked. “Thursday’s quake might have been a foreshock of this one,” Shinji Toda, a professor at Tohoku University, told NHK.

Several aftershocks rattled the region later on Saturday, including two of nearly 6 magnitude, and the Meteorological Agency warned of more.

Television footage showed many frightened people wrapped in blankets sitting outside their homes.

“We are making every effort to respond to this quake,” Chief Cabinet Secretary Yoshihide Suga told reporters. He confirmed there were no problems at any of the three nuclear power plants in the region.

A magnitude 9 quake in March 2011, to the north of Tokyo, touched off a massive tsunami and nuclear meltdowns at Fukushima. Nearly 20,000 people were killed in the tsunami.

Here is an early photo of a collapsed building:

 

A land avalanche was caught by Japanese media.

 

Finally, a live webcast from the local TBS News:

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Submitted by Patrick Buchanan via Buchanan.org,

This week, SU-24 fighter-bombers buzzed a U.S. destroyer in the Baltic Sea. The Russian planes carried no missiles or bombs.

Message: What are you Americans doing here?

In the South China Sea, U.S. planes overfly, and U.S. warships sail inside, the territorial limits of islets claimed by Beijing.

In South Korea, U.S. forces conduct annual military exercises as warnings to a North Korea that is testing nuclear warheads and long-range missiles that can reach the United States.

U.S. warships based in Bahrain confront Iranian subs and missile boats in the Gulf. In January, a U.S. Navy skiff ran aground on an Iranian island. Iran let the 10 U.S. sailors go within 24 hours.

But bellicose demands for U.S. retaliation had already begun.

Yet, in each of these regions, it is not U.S. vital interests that are threatened, but the interests of allies who will not man up to their own defense duties, preferring to lay them off on Uncle Sam.

And America is beginning to buckle under the weight of its global obligations.

And as we have no claim to rocks or reefs in the South China Sea — Vietnam, Taiwan, Malaysia, Brunei and the Philippines — why is this our quarrel?

If these rocks and reefs are so vital they are worth risking a military clash with China, why not, instead, impose tariffs on Chinese goods? Let U.S. companies and consumers pay the price of battling Beijing, rather than U.S. soldiers, sailors and airmen.

Let South Korea and Japan build up their forces to deal with the North, and put Beijing on notice:

If China will not halt Kim Jong Un’s nuclear weapons program, South Korea and Japan will build their own nuclear deterrents. Half a century ago, Britain and France did.

Why must we forever deter and, if need be, fight North Korea?

And why is the defense of the Baltic republics and East Europe our responsibility, 5,000 miles away, not Germany’s, whose economy is far larger than that of Russia?

Even during the darkest days of the Cold War, U.S. presidents refused to take military action in Hungary, Czechoslovakia or Poland.

When Moscow intervened there, the U.S. did nothing. When did the independence of Eastern Europe become so vital an interest that we would now risk war with a nuclear-armed Russia to ensure it?

Under Article 5 of NATO, an attack upon any of 28 allied nations is to be regarded as an attack upon all.

But is this the kind of blank check we should give Turkey’s Recep Tayyip Erdogan, who, a few months back, ordered a Russian fighter plane that crossed into Turkish territory for 15 seconds be shot down?

Do we really want to leave to this erratic autocrat the ability to drag us into a war with Russia?

When Neville Chamberlain in 1939 handed a war guarantee to a junta of Polish colonels, who also had an exaggerated opinion of their own military power and prowess, how did that work out for the Brits?

America should not write off the Baltic Republics or Eastern Europe. But we should rule out any U.S.-Russian war in Eastern Europe and restrict a U.S. response to Russian actions there to the economic and diplomatic. For the one certain loser of a U.S.-Russian conflict in Eastern Europe — would be Eastern Europe.

As for Iran, the U.S. intelligence community, in 2007 and 2011, declared with high confidence that it had no nuclear weapons program.

Since the Iran nuclear treaty was signed, 98 percent of Iran’s enriched uranium has been shipped out of the country; no more 20 percent enriched uranium is being produced; the Arak reactor that could have produced plutonium has been scuttled and reconfigured; and nuclear inspectors are crawling all over every facility.

Talk of Iran having a secret nuclear-bomb program and testing intercontinental missiles comes, unsurprisingly, from the same folks who assured us that Iraq had weapons of mass destruction.

The goal is the same: Stampede America into fighting another war, far away, against a nation they want to see smashed.

Since the end of the Cold War in 1991, this country has been steadily bled and slowly bankrupted. We are now as overextended as was the British Empire in the 1940s.

And like that empire, we, too, are being challenged by nations that seek to enlarge their place in the sun — a resurrected Russia, China, Iran. And we are being bedeviled by fanatics who want us out of their part of the world, which they wish to remake according to the visions of their own faiths and ideologies.

Time for a reappraisal of all of the war guarantees this nation has issued since the beginning of the Cold War, to determine which, if any, still serve U.S. national interests in 2016. Alliances, after all, are the transmission belts of war.

This is not isolationism. It is putting our country first, and staying out of other people’s wars. It used to be called patriotism.

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Now that not only Mario Draghi but also Ben Bernanke have joined in the loud and growing chorus of “economic experts” debating the arrival of the monetary paradrop and suggesting that that helicopter money “may be the best available alternative“, it is just a matter of time before helicopter money is actually implemented, “maybe not today, but in the next recession” according to Deutsche Bank.

And it is the same Deutsche Bank that provides a handy primer how to trade (or frontrun as the case may be) this now inevitable and terminal monetary policy.

From DB’s George Saravelos, “Helicopters 101: your guide to monetary financing“

Market implications

 

The starting point of understanding asset moves should be the type of policy response as well as its effectiveness. Here we assume an aggressive form of stimulus large enough to generate an increase in inflation and growth expectations – for instance, a one-off write-down of debt owned by the central bank as well as large-scale fiscal stimulus financed by the issuance of zero-coupon perpetual bonds bought by the central bank. We assume that the market perceives the policy as “successful”, namely that both growth and inflation expectations rise. Under this scenario, we would expect the following:

 

Bond yields should rise and the curve should bear-steepen. Our colleagues in fixed income last year published a framework on understanding the drivers behind long-dated yields.26 We list the components of the 10-year yield below and the anticipated impact:

 

 

Taking all the factors above, the ultimate effect on yields is ambivalent, depending on the interaction between falling credit risk, rising demand-supply imbalances (downward pressure on yields) versus higher growth and inflation expectations (upward pressure). At one extreme, if the market perceives the policy as a failure, credit risk and demand/supply imbalances are likely to dominate, putting even further downward pressure on yields. At the other extreme, if the policy is perceived as a loss of monetary discipline, inflation expectations would spike, leading to an aggressive re-pricing of yields higher.

 

On balance, under the assumption of policy “success” without fears of hyperinflation, we would conclude that bond yields rise, driven by the long end.

• The currency should weaken, but may eventually strengthen. Real yields have proven one of the most important drivers of currency moves in the post-crisis years, so the effect of helicopter money on FX will likely depend on their direction. The large depreciations in both the euro and yen over the last few years were driven by large downward shifts in real yields (charts). The effect of helicopter money on real yields is ambivalent, as outlined above. We assume that inflation expectations would dominate over growth, at least initially, with a central bank commitment to keep nominal rates low for long also helping. Eventually higher growth and tighter policy could lead to a stronger currency, however. Other frameworks suggest that currencies should at least initially weaken as well. The monetary approach to exchange rate determination concludes that the relative supply of money between two economies ultimately determines the exchange rate. An irreversible and permanent increase in the money stock (compared to the reversibility of QE flows via maturing bonds) should all else constant lead to a weaker currency.
• Equities should rally. The most straightforward equity valuation models suggest that a stock price is the sum of the net future earnings discounted by the appropriate nominal risk free rate. Higher nominal growth expectations would, all else constant, lead to higher future earnings, but higher yields would lower the value of these earnings via a higher discount factor. Ultimately, the effect on equities will depend on the interaction between nominal growth expectations and nominal yields. A helicopter drop that allows a moderate rise in yields combined with higher nominal growth expectations should lead to higher equity prices.

We conclude that a “successful” helicopter drop, defined as generating higher growth and inflation expectations but without a permanent overshoot of the inflation target, should lead to higher and steeper yield curves, a weaker currency (at least initially) and higher equity valuations.

 

This notwithstanding, it is important to emphasize that there are alternative equilibria too. At one extreme, if the policy is not perceived as sufficient in size and impact, then the supply/demand imbalances in fixed income may be exacerbated (less issuance and debt outstanding) without a corresponding move higher in inflation expectations. This would lead to a market reaction similar to the one that followed the BoJ cut to negative rates earlier this year: lower yields, weaker equities and a stronger currency. At the other extreme, if the long-term commitment to the inflation target is challenged and central bank credibility is lost, long-dated yields would spike higher, capital flight would ensue and risk assets would substantially underperform.

 

A “successful” helicopter drop may therefore be easier said than done given the non-linearities involved: it needs to be big enough for nominal growth expectations to shift higher and small enough to prevent an irreversible dis-anchoring of inflation expectations above the central bank’s target.

 

Either way, the behavior of the latter is the key defining variable both for the policy’s success as well as the asset market reaction.

* * *

Good luck Janet, and we hope it’s now clear to you why Bernanke got the hell out of Dodge when he did.

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