Listen to this Episode:
Dynamic duo “Fed Watch” is back in another episode. This time, Christian Keroles and I are walking through policy updates from the three major central banks of the world, the Federal Reserve, the European Central Bank (ECB) and the People’s Bank of China (PBOC).
This year has been full of central bank action and it can be difficult to stay on top of everything that is happening, even for those trying to pursue financial issues. The global recession is far from over, and while the Federal Reserve and Jerome Powell may be holding policy steadily, the ECB and PBOC are currently battling slowing economic numbers .
ECB policy is the most exciting because it is the most active, with the most colorful rhetoric. Last week, it expanded its stimulus program €500 billion. Their Pandemic Emergency Purchase Program (PEPP) is now on the threshold €1.85 trillion. In the ECB’s statements, he admits to fighting deflation and a strong euro, despite unprecedented action by the central bank this year. It seems the more he does, the worse his situation gets.
The Federal Reserve meets on December 16, 2020, for its last meeting of the year. Chairman Powell is expected to keep the policy unchanged. Relative to the strength of the euro and renminbi, the US dollar has been weakening, with the dollar index (DXY) extending annual lows and nearing two-year lows. This introduces duality, the least active central bank has the weaker currency, which is contrary to the accepted wisdom that central bank activity depreciates currency.
The next central bank of interest in this episode of Fed Watch is the PBOC. After an update on the Digital Yuan project, we discussed the wave of pitfalls faced by the PBOC in recent weeks. To address the deflationary pressures in the Chinese economy it has rolled over and expanded $ 145 billion on previous bailout loans.
The episode concluded with a discussion about a possible speculative attack against the dollar. MicroStrategy has given people an outline on how to borrow hundreds of millions of dollars and buy bitcoin with it. If this is done in high enough quantities, it can force the price of bitcoin up and the relative value of the debt down. MassMutual was also another big story, but as I said on the show, “Bitcoiners have been expecting this for a very long time.”
Here’s another great chapter to keep you up to date on central bank issues. Don’t forget to subscribe to Fed Watch’s new RSS feed, so you won’t miss any of our great guest insights in the future.