Growing Cracks In Macro Markets

Takeaway: Increasing signs of risk and fragility are revealing themselves around the globe.

Growing Cracks In Macro Markets - Lower for longer cartoon 05.28.2015

 

In case you missed it, just last night, IMF head Christine Lagarde said that growth has been "too low for too long," many people were "simply not feeling it" and warned that the IMF may lower its global growth forecast.

 

In related news.

 

Bingo!

 

Unfortunately... Lagarde returned to the old chestnut that central planners had the tools to gin up economic sentiment, activity, etc. As we've noted, monetary policy potency is failing around the world. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:

 

"But what do doves do when the #BeliefSystem on central-market-planning is breaking down? Draghi + Constancio both out this morning trying “whatever is needed” … Draghi says he “will not surrender”… Euro only moving -0.1% on that; Spanish and Italian stocks barely up and remain in crash mode."

 

Take a look at Germany

 

The dim outlook in Europe isn't getting any brighter.

 

Sorry Draghi.

 

Here's what negative interest rates (NIRP) really do to an economy via the Bank of International Settlements. According the Reuters:

 

"Euro zone banks should be encouraged to keep more of their profits rather than pay dividends, to bolster their capital and finance new loans, the head of research of the Bank of International Settlements [Hyun Song Shin] said on Thursday...

 

In his speech, Shin also said negative central bank interest rates discourage lending by squeezing the margin between the rate at which banks lend, which falls along with the policy rate, and the rate on deposits, which rarely goes below zero."

 

Not to mention Japan's crashing equity markets:

 

 

The #BeliefSystem that central planners can bend and smooth economic gravity is breaking down.


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