gata.org / By Greg Ig, Dow Jones Newswires via Fox Business, New York / July 18, 2017
http://www.foxbusiness.com/markets/2017/07/19/markets-to-fed-please-leav…
Bond yields around the world have surged since the European Central Bank hinted last month that its bond buying was coming to an end, a replay of the “taper tantrum” in 2013 when the Federal Reserve caught markets off guard with similar plans.
Both episodes are fodder for a view widespread in markets, that bonds long ago ceased to be an independent reflection of economic fundamentals and are now just a giant bet on what central banks do with their securities portfolios. According to this view, quantitative easing (QE), as this bond buying is known, zero to negative interest rates and detailed guidance on future monetary policy amount to market manipulation on a grand scale. Whatever the theoretical benefit to the economy, such manipulation muffles market signals, misallocates capital, and creates excesses that can come undone violently.
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