It's shaping up to be quite a week for central planners.
This week we've listened to the hand-wringing of Fed, ECB and BOJ officials. And it's only Wednesday. Here's a brief recap:
What was striking about Fed head Janet Yellen's testimony before Congress yesterday was the surprising contrast between fact and fiction.
Fiction: “The U.S. economy is doing well,” Yellen said and continued by reiterating her “expectation is that the U.S. economy will continue to grow.”
Fact: “Considerable uncertainty about the economic outlook remains,” Yellen continued, saying she was watching persistently low productivity growth, pressure from China's "considerable challenges" economically, Brexit risk, and a "loss of momentum" in the jobs market.
Another bit of fiction. Yellen made sure to underscore that this jobs market weakness was "not a deterioration." It was likely "transitory," she said.
As Hedgeye CEO Keith McCullough pointed out in this morning's Early Look, Yellen was asked directly about her favorite labor market indicator, the Change in Labor Market Conditions Index, being negative on an absolute basis for 5 months in a row. She responded with an answer about the importance of “levels" in which she essentially suggested that the rate of change wasn't important.
That's sad because, in addition to Yellen's favorite indicator rolling over, the rate of change in jobs growth is rolling over too. Proof? Take a look at the chart below. Non-farm payroll growth has been "deteriorating" since February 2015.
In other central planning news...
On Tuesday, ECB head Mario Draghi, said that European policymakers "stand ready" to act in the event of a Brexit vote.
- “In particular, the ECB is ready for all contingencies following the U.K.’s EU referendum,” Draghi said.
- During the Q&A, Draghi explained, "It would be difficult to speculate about one outcome [but] we’re trying to be ready to cope with all possible contingencies.”
In other words, fire up the helicopter?
Rounding out the central planning trifecta...
Yesterday, Bloomberg report that sources familiar with Japan's Ministry of Finance had ruled out unilateral intervention in the event of a Brexit surge in the yen. More likely, sources said, would be a joint intervention via the G7:
"This time, the G-7 probably would issue a statement to address any turmoil on Friday, and if there were joint intervention it would probably make that public, according to the people familiar with the talks. The G-7’s last joint currency intervention was in the wake of the 2011 Japan quake, when a statement was issued."
Meanwhile, BOJ Governor Haruhiko Kuroda (who was at the Ministry of Finance from 1999 to 2003) has warned about the "big" impact that currency gains could have on Japan’s inflation. On Monday, Kuroda said that the BOJ stands ready to add stimulus if needed.
But what makes policymakers so sure the intervention would be successful? The yen is up 13% this year despite the BOJ's negative interest rate policy and all the jawboning out of the Ministry of Finance.
As flummoxed central planners all over the world continue to flounder amidst stagnating economic growth, we continue to reiterate that the central planning #BeliefSystem is breaking down.
More to come.