Can Monetary Policy Save The Economy?

ECB and BOE are meeting soon. The market's vision is focused on the central bank. Once again, they have speculated on what kind of easing policy the central bank will release to save the world again. In the past decades, whenever the crisis occurred, the central bank made frequent efforts to stabilize the market. The market has long hit the central bank monetary policy drugs, has reached its own level, once the wind and grass, the vision of expectations to the central bank. But the central bank is not responsible for maintaining market stability, and has never written any central bank's policy objectives.

　　 Federal Reserve And so on, and so on. global market The stability is because they believe that the market is a weathervane of the future economy. According to market movements, actions can be made to adjust the economy as early as possible. But the question is: is the market really a good weathervane? Can the central bank's monetary policy continue to be effective?

Before discussing the upcoming Central Bank meeting, we might as well take a step back and look at the current situation of the market. The national debt market in developed countries has accounted for 35% of the negative interest rate bonds. How much can the interest rate go down even if the ECB is increased by QE? In the end, is the bank balance sheet not cleared up, the residents' departments are too high in debt to lend money or our interest rate is too high? The yield of the 50 year bonds in Switzerland has also fallen to negative. Imagine that holding the Swiss bonds for 50 years = It has no interest plus a continuous deficit for 50 years.

Yes, that's the current market view of inflation. Let's look at the reflection of the market. inflation expectations The swap curve is equally exaggerated. In 50 years, inflation in the euro area is still far below 2%. How long did today's low inflation environment and monetary policy last? The market began to inflate its price to 50 years ago.

Finally, take a look at Italy, a country with decades of 0 growth. Debt has been rising since 2011, thanks to ECB's policies such as SMP, ANFA and QE. We regard such abnormal facts as normal, which is based on the continuous monetary policy of ECB, and ultimately will precondition the market. Taking the current unsustainable market status as a matter of course, the central bank's monetary policy may have begun to fail.