It was about 5 years ago, roughly the same time we launched our crusade against HFT, that we also first made the accusation that as a result of QE and the Fed’s central planning, the forward-looking, discounting mechanism formerly known as the “market” no longer exists, and instead has been replaced with a policy vehicle designed to create a “wealth effect” if only for those already wealthy. In other words, while HFT may have rigged the market, it was the Fed that has openly broken it.
Today, none other than the WSJ is the latest to confirm this. To wit:
We’ve had more proof that financial markets are in thrall to central banks rather than caring about the health of the economy. Data out of Asia and Europe were disappointing, with China suffering a drop in both exports and imports and with industrial production in Italy softening as deflation worries persisted in France. Yet markets are stronger everywhere today. In Asia, that was partly explained by the largely expected but still significant news that China will allow Hong Kong shares to trade in Shanghai, marking a further easing in capital controls. But the real driver has been expectations of continued monetary accommodation from central banks. First, it was the minutes from the Federal Open Market Committee yesterday, which gave the impression that the Fed is eager to convey a message that it wants to keep providing long-term stimulus. Then it was the poor data in Europe, which, rather than unnerving investors, simply raised expectations that the European Central Bank will take aggressive steps to ward off deflation.
And to think 5 years ago this would be considered daylight, fringe tinfoilhat bloggery. Our advice to the WSJ, next time use quotation marks as follows: “markets”