One of the things I liked most about being a stock broker when I was one was the rhythm of the markets. One could feel the economy if one paid enough attention. Sometimes an area of the economy would present a fleeting opportunity for profits. Sometimes the opportunity was seized. Sometimes it wasn‘t. Sometimes a trade went the wrong way. But up or down there was at least the perception, and I think it was more than a perception even with the Greenspan Put, that market forces fundamentally drove markets.
Now it seems like the central planners, the Federal Reserve, the ECB, the Bank of China, the Bank of Japan, are the ones who determine directly whether stock and commodity markets go up or down. It is the movements of these colossal economic gorillas which determine the direction of the “new normal” as PIMCO’s Mohamed El-Arian has put it.
I miss the market centered markets. I know I’m not the only one.
And so, even as markets rejoice at the renewed application of the Keynesian prescription, we at Alhambra mourn that the day of true recovery has been delayed once again. One of the central insights of Friedrich Hayek was that government interventions cause distortions that lead to more interventions to correct the distortions of the previous interventions. We are so far along the spiral of the Road To Serfdom that a reversal of course at this point would likely involve considerable pain but the current path is far from pain free and will in the end cause even more pain. For those who own stocks or commodities or the other objects of desire that encompass the central planners plan, the benefits of further “stimulus” far outweigh the costs. For those who are the nominal targets of such plans, the costs – of most everything – rise while the benefits remain elusive.