NIRP: What Central Bankers Can Learn from Dr. Dolittle as Market Tanks

Surprise surprise!   The market tanked today.  Maybe you should just turn off your screen just go and see a movie?

I highly recommend you  see   Dr. Dolittle and his Schizophrenic Push me-Pull you. The Push me Pull you is a two-headed llama.  One llama is a tough- love  interest rate hawk who wants to go right; the other a llama is an easy-money dove in favor of unlimited quantitative easing and negative interest rates policy.

Rex Harrison as Dr. Dolittle, Janet Yellen (llama on left) and Mario Draghi (on right), the parrot’s name is NIRP

The  story is about the world’s central bankers portrayed by this lovable but sexually frustrated  beast that wants to go in different directions–  one  want rates so low they drop below zero and the other wants  to cool an over-heated market. Needless to say, this is a horror film, not for the squeamish and (warning: spoiler alert) it does not end well.

Classic bubbles, perpetuated by easy money,  are recapitulations  of Newton’s law of gravitational attraction: “what goes up must come down.”  Negative interest rates, on the other hand, move us into an alternate universe,  the weird and whacky world of quantum finance where reality is nothing but an illusion– but a very persistent one” as Einstein said.

As negative interest rates have been embraced by half the central banks, the Fed’s wait-and-see posture today seems more like an illusion than  reality:  that a rate hike will be too hard to resist.  The market tanked instantaneously taking this change in market sentiment as the  harbinger of an end  to the era of easy money.

Cheng and Eng Bunker figured it out and actually fathered children

Dr. Dolittle’s Push me-Pull you is a reminder  that when half the world is  betting rates go up and half betting they will go down, trouble lies ahead. In the end, everyone gets screwed.

It also reminds us that central bankers should not play dice.

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