gabe borenstein

When Central Bankers Clash, Stock Markets Can Crash

The ECB and the FED as well as other Central Banks have a different mission.Let's accept the notion that the higher rates will lower the inflation rate (and expectations of)by declerating economic growth .If the Central Bank underestimates the impact of the higher rates on the economy ,a major economic debacle may follow,ie Great Depression.
Oil.untill now has been priced in dollars.By raising the rates and implying more hikes in the future,the ECB had managed to weaken the dollar by about 50% vs the Euro. As the oil priced had spiked ,the shift in the currency relationship in favor of Euro ,had lowered inflationary pressures in Europe.At the same time this policy will create a European Armageddon in the period ahead.The U.S American economic deceleration will decelerate European growth.Simultaneously,... higher rates imposed on Europe will only intensify severe slowdown.If the ECB decides to ease they will face stagflation.Anyhow ,because of the monetary lag ,any attempt to deflect potential European implosion to follow ,will not be effective.
The FED had chosen the right monetary course .Most of the post subprime debacles have been addressed .The record open short interest in the equity markets reflect a massive speculation (including hedge funds),not a investors liquidation(although some of it transpires as well).
Objectively speaking ,the risks that the U.S had faced ,will be the risks that the global economies are about to face.We have addressed most of our issues ,the others have not.The sequential economic implosion outside the U.S will cause an unprecedented fight to U.S assets.
Unprecedented stock market rally will follow and the yield curve underdog (10 yr treasuries)will rally even if for the wrong reasons.