There is a strange freezing over of markets in process. Stock markets cannot rise, but they cannot fall. The same is happening to commodities like gold and oil. They pop up a fraction now and again, but don’t get going to new highs. And yet they don’t fall either. Currencies too are locked into narrow ranges again. Trade is thinning, but prices of weaker assets are somehow holding up.
Is there a new strategy being pursued by the world’s banks? To prevent markets from being able to move, placing them in an arm-lock?
The world’s central banks started off by insisting that governments support the wholesale and retail banks, and provided the necessary funding to do that, ensuring they were kept from crashing in 2009. Now they are demanding renewed fiscal discipline from reckless governments, and are cutting back the quantitative easing permitted last year. ‘Government’ spending is being brought down.
They must be doing something else though to keep the current downturn at bay, that something being to ensure that there is enough buying of all primary asset classes to prevent a downturn from gathering momentum. Confidence is thereby being kept up.
How else can the behaviour of markets be explained?
The world’s central banks are not asking ‘governments’ to keep markets working any longer, and channelling their funding via governments. They are propping the markets up themselves. The central banks are for the first time bypassing ‘governments’ and are going direct into markets through other agencies, intervening globally.
Goldman Sachs rules the world at last – literally. Human emotion that previously drove prices up and down has been replaced with bureaucratic control. The only question in my mind is how long will this market straitjacket be kept on. And will the selling suddenly become overwhelming, caused by some unforeseen event, which overpowers the ability of central banks to control everything?
By holding back the downturn, will they actually make it worse when it finally comes?