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The Corrosion of Confidence

Posted on June 29, 2016

The Corrosion of Confidence

Posted on June 29, 2016

Recently, given the Brexit vote, and the Bank of England's1 stance to shore-up the volatility that follows made me think about confidence.  Confidence is what’s needed due to the amount of fear and uncertainty the market illustrates.  Currently, the BOE is the confidence Britain needs at this shaky moment.  

The fact that confidence [and upside jolts] in our markets occur more-often-than-not these days IF central banks step-in is becoming more and more ‘the norm’ than I believe at any other time before.  The fact that the BOE may step-in, to me, looks like more of a symptom of a problem rather than a cure.  [Remember, only a few months ago Janet Yellen and the IMF admitted to the current subpar economic data around the globe thus prompting Yellen again from raising rates].
 
All that said, it’s relieving to see that even the BOE understands it can’t solve it all,
“Highlighting the uncertainties caused [by] the vote to leave the European Union, [Mark] Carney [the BOE governor] said in a speech Friday that "monetary policy cannot immediately or fully offset the economic implications of a large, negative shock."2

So, given that last statement from Carney, where does that leave us when a central bank’s powers can’t keep another economic crisis contained?
 
Jos. G. Sellery
 
Sources:
1 http://www.investors.com/news/economy/bank-of-england-pledges-345-billion-for-brexit-volatility/
2 http://www.investors.com/newsfeed/ap/637637-the-latest-bank-of-england-head-cant-protect-from-pain/

note: see the section labelled "4:30pm"