Failure of Central Bank Policy

By Monday August 7th, 2017 Economy

Don’t ever forget what is really happening in the global economy and it’s likely impact on financial markets over the longer term. Whatever you do, don’t get caught up by the noise.

Many commentators will continue to tell you to commit to risky financial assets just because central banks continue to leave monetary policy loose. But in reality easy monetary conditions mean that central banks have failed.

Central bankers keep threatening to tighten policy so that they can give the illusion that their policies are working before weak economic data typically forces them to back off again. This week the Federal Reserve policy meeting is expected to leave monetary policy unchanged despite Fed Board members threatening on several occasions in recent weeks to tighten policy. Just last week the European Central Bank (ECB) also seemed to pull back off from a commitment tighten through a tapering of quantitative easing.

However the only reason you would want to commit long term to risky investments in an aggressive way would be if central bank policy was working not failing.

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