Do Whatever it Takes to Shock and Awe
September 5, 2014
Draghi beats "Wall Street" estimates. Markets rejoice. I’m not really that old. And I don’t have tothink back all that many years to recall when “Fed watchers” would monitor every move of our central bank’s “open-market operations” in hope of discerning subtle changes in monetary policy. Things changed profoundly during the nineties, as a long tradition of conservative central banking principles gave way to “activist” monetary management.
Thursday provided yet another chapter in the fateful evolution of contemporary central banking. In what I’ll call “Do Whatever it Takes to Shock and Awe,” Mario Draghi straggled deeper into the uncharted territory of negative rates, while also announcing a plan to aggressively expand the European Central Bank’s (ECB) balance sheet (create “money”) through the purchase of asset-backed securities (ABS) and covered loans. European stocks and bonds surged on the surprise announcement, as the euro currency was taken out to the woodshed.
Central banks now freely peg short-term interest rates (near zero!), manipulate market yields, monetize debt, target/spur higher stock and risk asset prices and essentially promise continuous and liquid securities markets. Importantly, central bankers have been conditioned to absolutely avoid disappointing the markets. Indeed, heads of central banks have one-upped corporate America in striving to “beat expectations.” There is no longer anything cautious or subtle with respect to monetary management. The goal is precisely the opposite. One might these days contemplate why it took central banking a few hundred years to figure this all out – to appreciate the myriad benefits of zero rates, debt monetization and perpetual bull markets.
It seems completely lost on both today’s policymakers and pundits that throughout history global finance was for the most part a self-correcting system of interconnected domestic monetary systems. The inflation of money and Credit was constrained by the likes of gold/precious metals standards, global currency regimes (i.e. Bretton Woods), bank reserve and capital requirements and, fundamentally, by disciplined behavior from bankers, government officials and market participants more generally. The gold standard, in particular, was successful in large part because of the strong commitment nations (policymakers and economic agents) had in preserving the system. Importantly, such a system was self-adjusting and self-correcting. Participants understood that there would be predictable policy countermeasures in the event the system began to move in the direction of excess, with their actions working to counter fledgling excesses and imbalances in finance as well as the real economy.
Things changed profoundly throughout the nineties with the explosion of market-based “money” and Credit. It amounted to nothing less than the final breakdown of any semblance of restrained global finance. With the proliferation of GSE and “Wall Street” finance, there were no longer constraints on the quantity or quality of U.S. “money” and Credit, constituents of the world’s “reserve currency.” America’s feeble savings didn’t matter. Troubling “twin deficits” (fiscal and trade) no longer mattered. With the U.S. able to run perpetual trade deficits, the economic structure could shift to consumption and services and away from industry and production.
Unfettered finance became the U.S.’s leading export to the world – year in and year out. Whether in the real economy, throughout Credit systems or for the financial markets, unconstrained global finance profoundly altered system dynamics: the forces of self-adjustment and correction were relegated to financial and economic history.
Heightened monetary instability and resulting serial Bubbles were readily on display all throughout the nineties. Fatefully, central bankers turned only more “activist.” Instead of recognizing and countering the newfound propensity for system Credit and speculative excess, the Greenspan Fed adopted progressively more interventionist policies (market interventions, manipulations and liquidity backstops).
I began warning/chronicling the mortgage finance Bubble in 2002. It was clear to me at that point that the Fed had learned nothing from its failed policies (including the 1998 LTCM bailout) that had been instrumental in fueling the “tech” Bubble. Worse yet, Fed officials, Wall Street pundits and many economists were calling for only more aggressive market interventions and manipulations. Fed governor Bernanke was espousing absolutely radical measures – while the inflationist caucus had their sights on mortgage Credit as the monetary expedient capable of resuscitating financial and economic booms. There was absolutely no doubt they were setting a disastrous course. It took six years.
In April 2009, I began warning/chronicling the “global government finance Bubble” – the “Granddaddy of all Bubbles.” It was (again) clear to me at that point that the Fed (and global central banks) had learned nothing from its failed policies that had been instrumental in fueling a much more systemic mortgage finance Bubble. Worse yet, Fed officials, Wall Street pundits and the economic community were calling for the most extreme monetary inflation, market interventions and manipulations imaginable. Having moved beyond mortgage Credit, the inflationists were determined to use government Credit to resuscitate general asset inflation (stocks, Treasuries, MBS, real estate, corporate Credit, etc.)
I didn’t anticipate an ECB determined to balloon its balance sheet with all kinds of securities. I didn’t anticipate that Fed holdings would inflate to $4.5 Trillion, nor did I imagine the BOJ willing to do open-ended QE to the tune of $700bn annually. I could not have predicted that post-crisis growth in the Chinese banks would exceed the total size of the U.S. banking system. I didn’t see the creation of Trillions of Chinese “shadow banking” assets. I would not have guessed that central bank international reserve holdings would surpass $12 Trillion by 2014 (almost doubling in six years).
I was, however, able to anticipate a very critical reality that remains fundamental to the ongoing global government finance Bubble: once the world’s central banks adopted unprecedented monetary inflation there would be no turning back. Target higher securities prices and then try to control runaway Bubble excess – in the face of ever-increasing global financial and economic fragility. Indeed, policymakers with their unlimited quantities of central bank Credit and government debt were playing with a much more combustible fire than what had previously culminated in “the worst financial crisis since the Great Depression.”
Traditional conservative central bank principles were fixated on price and financial stability. Foster a stable monetary (money and Credit) backdrop and leave the markets to market participants. Things have regressed to the point where unprecedented market intervention and monetary inflation are required to sustain runaway securities market speculative Bubbles around the globe. Conservatism in (rules-based) central banking was fundamental to avoiding big policy mistakes – as opposed to “activist” discretionary policymaking where policy errors inherently lead to only more catastrophic blunders.
There was never a chance inflationist policy doctrine would succeed. Policymaking today only exacerbates acute financial and economic instability. Central banks are stoking market excess with no hope for extricating themselves from unprecedented intervention and monetary inflation.
There are just so many flaws in conventional thinking. There is the myth that central bankers control some “price level” that they can dictate through policy measures. Yes, they do have the capacity for unfettered “money” creation, but this liquidity has disparate impacts on a multitude of prices. Today, the powerful inflationary bias in securities and asset prices ensures that central bank liquidity exacerbates speculative Bubbles while largely avoiding the real economy. In the face of historic financial excess and Bubbles, it has become impossible for economies to grow out of debt problems.
Draghi devised a clever scheme for buying asset-backed securities (No Germany, we’re not adopting QE financing of government deficits!) from the Eurozone banking system. But why would the banks then use this liquidity for risky lending in the stagnant European economy, when the ECB has made buying government bonds such an electrifying risk-free proposition? Securities markets are betting liquidity will continue to (over)flow into the markets. In Europe and around the world, central bank liquidity and market intervention policies have bolstered the case for financial speculation at the expense of real economy investment.
Unable to inflate a general price level and incapable of determining the effects of their liquidity-creating operations, central bank “money” at this point chiefly chases security market returns while stoking Bubbles. Whether it is the ECB, Fed or BOJ, throw liquidity into the system and it will avoid the disinflationary forces prevalent in real economies in favor of the highly inflationary impulses commanding incredibly speculative global securities markets.
Moreover, in today’s highly connected and unbalanced global system, “money” gravitating toward real business investment works to exacerbate overinvestment and overcapacity, especially in China and Asia. The upshot is only greater instability associated with extreme liquidity overabundance in a global system steeped in deteriorating economic profits and inflating financial and speculative returns. Meanwhile, monetary disorder continues a highly uneven distribution of wealth, within individual countries as well as globally. Remarkably, the policy response is only more vociferous “Do Whatever it Takes to Shock and Awe.”
“When and how does it all end,” is an obvious question. It’s impossible to know, although there is a list of potential catalysts: Crisis in China, geopolitical and a market accident seem to remain at the top of my list. Yet thus far heightened risk – certainly on economic and geopolitical fronts – have ensured “Whatever to Shock and Awe” – more QE from Kuroda, QE from Draghi and, apparently, zero for longer from Yellen.
September 5 – Wall Street Journal (Steven Russolillo): “Professional stock pickers have had a terrible 2014. With Labor Day in the rear view mirror and less than four months remaining in 2014, Goldman Sachs Group Inc. takes a moment to examine how fund managers have fared so far and evaluate the circumstances they face for the rest of the year. It isn’t a pretty picture, but Goldman says that may actually bode well for the market through the rest of the year. Only 23% of large-cap mutual fund managers have outperformed the S&P 500 this year, rivaling the worst performance in the past decade, according to David Kostin, chief U.S. equity strategist at Goldman… Other stock pickers are also struggling in the current environment. Fewer than 20% of large-cap growth and value managers have outperformed their respective Russell 1000 benchmarks, according to Goldman. Hedge funds have also woefully underperformed. The average hedge fund is up just 2% this year, according to industry tracker HFR, compared to about a 10% return, including dividends, for the S&P 500. ‘Choice of shorts and market timing are the clear sources of blame,’ Mr. Kostin said.”
How about the notion that today’s capricious global “activist” policymaking is a market accident in the making? It’s compelling. After all, below the surface of this irrepressible bull market are myriad unhealthy underpinnings. Why are stock pickers having such a miserable time of it? What’s behind the ongoing struggles in the hedge fund community? How can “money” flowing blindly into equity index ETFs just trounce most active managers – mutual funds and hedge funds alike? Because the markets are broken.
Central bank policies ensure that too much (and inflating quantities of) “money” chases too few securities. Zero rates and central bank liquidity backstops have ensured that way too much “money” is chasing too few risk (higher-yielding/returning) assets. Global financial speculation has become one colossal “crowded trade” of epic proportions. Never in history has so much “money” been dedicated to trend-following and performance-chasing speculation. Never in history have central bank measures had such a profound impact on market perceptions, trading dynamics and speculative flows. Arguably, securities prices have never been so detached from fundamental prospects. Never has policy created such uncertainty with respect to what the future holds for finance, the markets, real economies and “geopolitics” around the world. Such a backdrop foments extremely difficult market underpinnings, masked by market indexes rising effortlessly into record territory.
Markets so far this year have punished the Treasury bears. Those betting against what seemed at the beginning of the year to be ridiculously mispriced European periphery debt markets have been killed. The dollar bears have been hammered. The bludgeoned equities bears have been further bludgeoned. The last couple months have seen the emerging market bears taken out to the woodshed (Shanghai Composite up 13% since July 21st). In the face of fragile underpinnings, EM stocks, bonds and currencies have performed exceptionally well.
Throughout global markets, securities prices have tended to defy fundamental analysis. There has certainly been a proclivity for short covering/squeezes – and resulting market outperformance that has enticed flows from the vast global pool of trend-following/performance-chasing speculative finance. Securities prices have been overshooting globally, especially where managers were either short or underweight. This has led to poor performance for all varieties of long/short strategies and resulting outflows - which feeds a self-reinforcing dynamic of short covering (buying) of fundamentally suspect securities/markets along with the liquidation of positions in securities/markets generally viewed as relatively attractive.
This dynamic then intensifies the difficulty for the active-management “stock picker” community, much to the benefit of the burgeoning ETF complex and the bevy of “closet indexers.” It’s no coincidence that this “active manager trounced by index” dynamic occurs simultaneous with historic extremes in “market” bullishness. Indeed, “money” flowing freely into “the market” powers the indexes higher, as aggravated active managers are forced to throw in the towel (including covering shorts and unwinding hedges) and jump aboard the inflating indexes. Below the surface, the “crap” significantly outperforms, much to the benefit of the momentum speculator crowd - but at the expense of the lowly investor (and market stability). It’s all a recipe for quite a market speculative blow-off – similarities to 1999 but across virtually all asset classes all over the world (as opposed to chiefly the U.S. technology sector).
Hundreds of billions flowing into stock and corporate debt indexes is definitely a recipe for a market accident, especially when these flows are largely premised on the notion that stock prices (at least eventually) always go up and that central banks will continue to guarantee buoyant and liquid markets. Throw in a global speculator community that has surely been forced into aggressively long positioning, yet with one eye on hedging instruments and the other on the exits.
And I’d be remiss if I didn’t mention the risk in Draghi’s “Do Whatever it Takes to Shock and Awe.” When he uttered “Do Whatever it Takes, and believe me it will be enough…” back in 2012, this was a direct threat to the speculators that they had better cover their euro-related shorts and go long. This week’s ECB measures came with Spanish yields below 2.25% and Italian yields below 2.5%. They came in the midst of more than ample market liquidity, with European stock prices not far from record highs. For good reason, the markets took Draghi’s Shock and Awe as a direct attack on the euro currency. And in this age of leveraged “carry trades,” trend-following/performance chasing speculation and booming derivative trading, those seeking a weaker euro (European policymakers) should be careful what they wish for. Beggar thy neighbor took a giant leap this week – in the convenient guise of fighting “deflation.”
Thursday provided yet another chapter in the fateful evolution of contemporary central banking. In what I’ll call “Do Whatever it Takes to Shock and Awe,” Mario Draghi straggled deeper into the uncharted territory of negative rates, while also announcing a plan to aggressively expand the European Central Bank’s (ECB) balance sheet (create “money”) through the purchase of asset-backed securities (ABS) and covered loans. European stocks and bonds surged on the surprise announcement, as the euro currency was taken out to the woodshed.
Central banks now freely peg short-term interest rates (near zero!), manipulate market yields, monetize debt, target/spur higher stock and risk asset prices and essentially promise continuous and liquid securities markets. Importantly, central bankers have been conditioned to absolutely avoid disappointing the markets. Indeed, heads of central banks have one-upped corporate America in striving to “beat expectations.” There is no longer anything cautious or subtle with respect to monetary management. The goal is precisely the opposite. One might these days contemplate why it took central banking a few hundred years to figure this all out – to appreciate the myriad benefits of zero rates, debt monetization and perpetual bull markets.
It seems completely lost on both today’s policymakers and pundits that throughout history global finance was for the most part a self-correcting system of interconnected domestic monetary systems. The inflation of money and Credit was constrained by the likes of gold/precious metals standards, global currency regimes (i.e. Bretton Woods), bank reserve and capital requirements and, fundamentally, by disciplined behavior from bankers, government officials and market participants more generally. The gold standard, in particular, was successful in large part because of the strong commitment nations (policymakers and economic agents) had in preserving the system. Importantly, such a system was self-adjusting and self-correcting. Participants understood that there would be predictable policy countermeasures in the event the system began to move in the direction of excess, with their actions working to counter fledgling excesses and imbalances in finance as well as the real economy.
Things changed profoundly throughout the nineties with the explosion of market-based “money” and Credit. It amounted to nothing less than the final breakdown of any semblance of restrained global finance. With the proliferation of GSE and “Wall Street” finance, there were no longer constraints on the quantity or quality of U.S. “money” and Credit, constituents of the world’s “reserve currency.” America’s feeble savings didn’t matter. Troubling “twin deficits” (fiscal and trade) no longer mattered. With the U.S. able to run perpetual trade deficits, the economic structure could shift to consumption and services and away from industry and production.
Unfettered finance became the U.S.’s leading export to the world – year in and year out. Whether in the real economy, throughout Credit systems or for the financial markets, unconstrained global finance profoundly altered system dynamics: the forces of self-adjustment and correction were relegated to financial and economic history.
Heightened monetary instability and resulting serial Bubbles were readily on display all throughout the nineties. Fatefully, central bankers turned only more “activist.” Instead of recognizing and countering the newfound propensity for system Credit and speculative excess, the Greenspan Fed adopted progressively more interventionist policies (market interventions, manipulations and liquidity backstops).
I began warning/chronicling the mortgage finance Bubble in 2002. It was clear to me at that point that the Fed had learned nothing from its failed policies (including the 1998 LTCM bailout) that had been instrumental in fueling the “tech” Bubble. Worse yet, Fed officials, Wall Street pundits and many economists were calling for only more aggressive market interventions and manipulations. Fed governor Bernanke was espousing absolutely radical measures – while the inflationist caucus had their sights on mortgage Credit as the monetary expedient capable of resuscitating financial and economic booms. There was absolutely no doubt they were setting a disastrous course. It took six years.
In April 2009, I began warning/chronicling the “global government finance Bubble” – the “Granddaddy of all Bubbles.” It was (again) clear to me at that point that the Fed (and global central banks) had learned nothing from its failed policies that had been instrumental in fueling a much more systemic mortgage finance Bubble. Worse yet, Fed officials, Wall Street pundits and the economic community were calling for the most extreme monetary inflation, market interventions and manipulations imaginable. Having moved beyond mortgage Credit, the inflationists were determined to use government Credit to resuscitate general asset inflation (stocks, Treasuries, MBS, real estate, corporate Credit, etc.)
I didn’t anticipate an ECB determined to balloon its balance sheet with all kinds of securities. I didn’t anticipate that Fed holdings would inflate to $4.5 Trillion, nor did I imagine the BOJ willing to do open-ended QE to the tune of $700bn annually. I could not have predicted that post-crisis growth in the Chinese banks would exceed the total size of the U.S. banking system. I didn’t see the creation of Trillions of Chinese “shadow banking” assets. I would not have guessed that central bank international reserve holdings would surpass $12 Trillion by 2014 (almost doubling in six years).
I was, however, able to anticipate a very critical reality that remains fundamental to the ongoing global government finance Bubble: once the world’s central banks adopted unprecedented monetary inflation there would be no turning back. Target higher securities prices and then try to control runaway Bubble excess – in the face of ever-increasing global financial and economic fragility. Indeed, policymakers with their unlimited quantities of central bank Credit and government debt were playing with a much more combustible fire than what had previously culminated in “the worst financial crisis since the Great Depression.”
Traditional conservative central bank principles were fixated on price and financial stability. Foster a stable monetary (money and Credit) backdrop and leave the markets to market participants. Things have regressed to the point where unprecedented market intervention and monetary inflation are required to sustain runaway securities market speculative Bubbles around the globe. Conservatism in (rules-based) central banking was fundamental to avoiding big policy mistakes – as opposed to “activist” discretionary policymaking where policy errors inherently lead to only more catastrophic blunders.
There was never a chance inflationist policy doctrine would succeed. Policymaking today only exacerbates acute financial and economic instability. Central banks are stoking market excess with no hope for extricating themselves from unprecedented intervention and monetary inflation.
There are just so many flaws in conventional thinking. There is the myth that central bankers control some “price level” that they can dictate through policy measures. Yes, they do have the capacity for unfettered “money” creation, but this liquidity has disparate impacts on a multitude of prices. Today, the powerful inflationary bias in securities and asset prices ensures that central bank liquidity exacerbates speculative Bubbles while largely avoiding the real economy. In the face of historic financial excess and Bubbles, it has become impossible for economies to grow out of debt problems.
Draghi devised a clever scheme for buying asset-backed securities (No Germany, we’re not adopting QE financing of government deficits!) from the Eurozone banking system. But why would the banks then use this liquidity for risky lending in the stagnant European economy, when the ECB has made buying government bonds such an electrifying risk-free proposition? Securities markets are betting liquidity will continue to (over)flow into the markets. In Europe and around the world, central bank liquidity and market intervention policies have bolstered the case for financial speculation at the expense of real economy investment.
Unable to inflate a general price level and incapable of determining the effects of their liquidity-creating operations, central bank “money” at this point chiefly chases security market returns while stoking Bubbles. Whether it is the ECB, Fed or BOJ, throw liquidity into the system and it will avoid the disinflationary forces prevalent in real economies in favor of the highly inflationary impulses commanding incredibly speculative global securities markets.
Moreover, in today’s highly connected and unbalanced global system, “money” gravitating toward real business investment works to exacerbate overinvestment and overcapacity, especially in China and Asia. The upshot is only greater instability associated with extreme liquidity overabundance in a global system steeped in deteriorating economic profits and inflating financial and speculative returns. Meanwhile, monetary disorder continues a highly uneven distribution of wealth, within individual countries as well as globally. Remarkably, the policy response is only more vociferous “Do Whatever it Takes to Shock and Awe.”
“When and how does it all end,” is an obvious question. It’s impossible to know, although there is a list of potential catalysts: Crisis in China, geopolitical and a market accident seem to remain at the top of my list. Yet thus far heightened risk – certainly on economic and geopolitical fronts – have ensured “Whatever to Shock and Awe” – more QE from Kuroda, QE from Draghi and, apparently, zero for longer from Yellen.
September 5 – Wall Street Journal (Steven Russolillo): “Professional stock pickers have had a terrible 2014. With Labor Day in the rear view mirror and less than four months remaining in 2014, Goldman Sachs Group Inc. takes a moment to examine how fund managers have fared so far and evaluate the circumstances they face for the rest of the year. It isn’t a pretty picture, but Goldman says that may actually bode well for the market through the rest of the year. Only 23% of large-cap mutual fund managers have outperformed the S&P 500 this year, rivaling the worst performance in the past decade, according to David Kostin, chief U.S. equity strategist at Goldman… Other stock pickers are also struggling in the current environment. Fewer than 20% of large-cap growth and value managers have outperformed their respective Russell 1000 benchmarks, according to Goldman. Hedge funds have also woefully underperformed. The average hedge fund is up just 2% this year, according to industry tracker HFR, compared to about a 10% return, including dividends, for the S&P 500. ‘Choice of shorts and market timing are the clear sources of blame,’ Mr. Kostin said.”
How about the notion that today’s capricious global “activist” policymaking is a market accident in the making? It’s compelling. After all, below the surface of this irrepressible bull market are myriad unhealthy underpinnings. Why are stock pickers having such a miserable time of it? What’s behind the ongoing struggles in the hedge fund community? How can “money” flowing blindly into equity index ETFs just trounce most active managers – mutual funds and hedge funds alike? Because the markets are broken.
Central bank policies ensure that too much (and inflating quantities of) “money” chases too few securities. Zero rates and central bank liquidity backstops have ensured that way too much “money” is chasing too few risk (higher-yielding/returning) assets. Global financial speculation has become one colossal “crowded trade” of epic proportions. Never in history has so much “money” been dedicated to trend-following and performance-chasing speculation. Never in history have central bank measures had such a profound impact on market perceptions, trading dynamics and speculative flows. Arguably, securities prices have never been so detached from fundamental prospects. Never has policy created such uncertainty with respect to what the future holds for finance, the markets, real economies and “geopolitics” around the world. Such a backdrop foments extremely difficult market underpinnings, masked by market indexes rising effortlessly into record territory.
Markets so far this year have punished the Treasury bears. Those betting against what seemed at the beginning of the year to be ridiculously mispriced European periphery debt markets have been killed. The dollar bears have been hammered. The bludgeoned equities bears have been further bludgeoned. The last couple months have seen the emerging market bears taken out to the woodshed (Shanghai Composite up 13% since July 21st). In the face of fragile underpinnings, EM stocks, bonds and currencies have performed exceptionally well.
Throughout global markets, securities prices have tended to defy fundamental analysis. There has certainly been a proclivity for short covering/squeezes – and resulting market outperformance that has enticed flows from the vast global pool of trend-following/performance-chasing speculative finance. Securities prices have been overshooting globally, especially where managers were either short or underweight. This has led to poor performance for all varieties of long/short strategies and resulting outflows - which feeds a self-reinforcing dynamic of short covering (buying) of fundamentally suspect securities/markets along with the liquidation of positions in securities/markets generally viewed as relatively attractive.
This dynamic then intensifies the difficulty for the active-management “stock picker” community, much to the benefit of the burgeoning ETF complex and the bevy of “closet indexers.” It’s no coincidence that this “active manager trounced by index” dynamic occurs simultaneous with historic extremes in “market” bullishness. Indeed, “money” flowing freely into “the market” powers the indexes higher, as aggravated active managers are forced to throw in the towel (including covering shorts and unwinding hedges) and jump aboard the inflating indexes. Below the surface, the “crap” significantly outperforms, much to the benefit of the momentum speculator crowd - but at the expense of the lowly investor (and market stability). It’s all a recipe for quite a market speculative blow-off – similarities to 1999 but across virtually all asset classes all over the world (as opposed to chiefly the U.S. technology sector).
Hundreds of billions flowing into stock and corporate debt indexes is definitely a recipe for a market accident, especially when these flows are largely premised on the notion that stock prices (at least eventually) always go up and that central banks will continue to guarantee buoyant and liquid markets. Throw in a global speculator community that has surely been forced into aggressively long positioning, yet with one eye on hedging instruments and the other on the exits.
And I’d be remiss if I didn’t mention the risk in Draghi’s “Do Whatever it Takes to Shock and Awe.” When he uttered “Do Whatever it Takes, and believe me it will be enough…” back in 2012, this was a direct threat to the speculators that they had better cover their euro-related shorts and go long. This week’s ECB measures came with Spanish yields below 2.25% and Italian yields below 2.5%. They came in the midst of more than ample market liquidity, with European stock prices not far from record highs. For good reason, the markets took Draghi’s Shock and Awe as a direct attack on the euro currency. And in this age of leveraged “carry trades,” trend-following/performance chasing speculation and booming derivative trading, those seeking a weaker euro (European policymakers) should be careful what they wish for. Beggar thy neighbor took a giant leap this week – in the convenient guise of fighting “deflation.”
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