Sunday, 19 February 2017

Who will be the first central bank chair to go?

Yellen, Carney or Draghi?

Yellen
Yellen must be on Steve Bannon's enemy list. She has been central in continuing and reinflating the neo-liberal framework that almost collapsed in 2008. The majority of Fed forecasts have proved over optimistic and their solution has been more of the same medicine (low rates, QE) while Obama ran up a $9Tn plus deficit bill.

Her four year term ends in Jan 2018. What would her replacement offer? Well someone needs to pay for tax cuts and infrastructure spending... and its clearly not going to be regular tax payers.

Carney
Osborne's boy outlasted his boss. Having blown up an enormous real estate bubble in Canada, he was duly brought over to repeat the act, while Osbourne tried to cut the deficit.

Despite failing to raise interest rates with the UK economy growing, various lines in the sand being crossed, and numerous Brexit consequence forecasts being wrong, he is still in the job. One can only assume that the shrewd, do nothing, politician in Downing Street is retaining him as a useful pawn to sacrifice when needed.

Draghi
He did whatever was necessary to keep the EU together, albeit together and without any structural EU-wide reform, that has ultimately benefited Germany and her intra-EU labour arb model, while hurting the social welfare states. The pushback from France and Italy is coming in the elections, while Martin Schultz, if he wins the German election, is likely to compromise to keep the EU in tact, question is, will Draghi be one of the compromises? That said reflation in the EU will require unorthodox policies and Draghi may be ready and willing.

Perhaps Super Mario will be the only incumbent seeing the next 12 months out.

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