Claire Corlett

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Fisher Investments on Global Monetary Policy | Capital Markets Update [2019]

Fisher Investments on Global Monetary Policy | Capital Markets Update [2019]

In 2018, the Federal Reserve continued raising
interest rates and reducing balance sheets. And the European Central Bank discontinued
quantitative easing. What do we expect looking at our monetary
outlook on a global basis for 2019? I personally predict that both of these central
banks will continue to be out of their mind. I learned as a kid that they always are, they
always will be and yet society pays them huge respect for someone that’s basically crazy. William Chesney Martin was the longest running
head of the US Fed ever. And he had this line that when you became
head of the Fed you took a little pill and it made you forget everything you ever knew
and it lasted just as long as your head at the Fed. The point being, that Central Banks are almost
always acting under the wrong influences and thinking about things wrong and people shouldn’t
expect much different. But unless the Fed or the ECB or, or, or,
Bank of England can do things, Bank of Japan can do things, unless they do something really
extreme, their stupidity is pretty normal. Expect stupidity. Expect them to do stuff that isn’t right. But don’t overemphasis it the way most people
do. Most people think they have more impact than
they really have. And don’t react too hastily to some of those
developments because despite what Central Banks may or may not do, we wanna pay attention
to how that translates into money supply growth. And when you look at money supply growth,
because on a global basis, it’s growing just fine, right. Not accelerating too significantly which would
cause inflationary concerns. And not falling over which would imply you
know, credits not getting it’s way to the broader economy. So, you know, despite some of the ill advised
policies by Central Banks globally, the money supply growth is growing at just a decent
rate. And I just wanna reiterate a point that we’ve
made for a long time but still no one seems to get, is that these extreme monetary policies
like quantitative easing and zero or negative interest rates around the world, they’re bad
not good. They don’t do anything to stimulate the economy. They don’t do anything to raise money supply
growth. They haven’t driven inflation. I mean you look at this economic cycle and
you featured all these extreme monetary policies, and yet we’ve had, generally, weaker economic
growth than past cycles. Certainly a lot weaker money supply growth. We’ve had very tame inflation and so, you
take these polices that everybody has viewed as stimulative, and when you see that they’re
actually depressive, and they actually are a bad thing for the economy, not a good thing,
you can see how the emergence from them could be a positive and why that’s powerful for
stocks is you take something that people fear and they think, boy, once we’re done with
quantitative easing whether it’s in Europe or the US or Japan, once that goes away, what’s
gonna support the economy, what’s gonna support the market. That makes people fearful about the end. But when they see that the emergence from
that is actually a good thing, that takes a negative view and turns it into a positive
view. And you don’t need to look past any further
than just the recent history of the US, the UK ending their quantitative easing programs
and seeing that things are pretty darn good afterwards, to see how now is, Europe is doing
that. Maybe at some point Japan will as well. By and large, monetary polices are getting
better not worse. And yet it’s a fear of things getting worse
that’s baked into the market but when they realize it’s actually better, that should
be a powerful force for stock prices. And for views on current events in the world
of investing, visit Updated daily, it offers on-demand access
to Fisher Investments’ most current thoughts on capital markets and the global economy,
as well as our sometimes irreverent commentary. We hope you’ll enjoy it!

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