Who’d a thunk it? That’s what a famous ventriloquist’s dumbest dummy was made to ask on a now-gone radio program whenever he confronted anything new and, to him, inexplicable, although obvious to anyone else. It came to mind when the central bankers of Sweden decided to take current interest rates further into negative territory. As share prices here plummeted, as the chair of our Federal Reserve Bank was grilled by two congressional committees about the possibility of the Fed adopting NIRP – a negative interest rate policy, an acronym that will live in infamy along with QE in the halls of hard money traditionalists – and ducked and dodged before refusing to rule it out, and as fear for the safety of the international financial structure mounted, one can imagine the Swedes asking, “Who’d a thunk it?”, although in a slightly more elevated way.
Here in America, two factors are intersecting to cause the fear factor to mount and traders to dash for the exits. Proving that my profession is aptly known as Political Economy, the first is political. Investors, businessmen sitting on cash piles, and Joe the Plumber have watched as avowed socialist Bernie Sanders drags Hillary Clinton to the left in their fight for the Democratic nomination. Sanders, who spent his honeymoon in Moscow, lays the problems of America, which in his view are numerous, at the feet of “millionaires and billionaires” who control the political process, and bankers whose incontinence and excessive risk-taking in pursuit of obscene profits caused the recent Great Recession. All to be corrected by taxing financial transactions, the wealth of said millionaires and billionaires, and requiring bankers who benefitted from a taxpayer bailout to seek still other bail, this to get out of the jails to which they will be consigned when Sanders takes over the White House. Unsettling talk, but not very. At least at first.
