The big question right now in the minds of investors is which side will win this titanic fight, the bulls’ optimism, or the pessimism of economic data? The answer is simple, none. In fact, the main winner will undoubtedly be the FED, since its importance has grown very significantly with the COVID crisis, having been the first port of comfort that the market has grasped from an early age. realizing that not only would the central bank intervene quickly, but that it would enter fields never experienced before. I doubt that the most optimistic could predict the institution’s participation in financing small and medium-sized enterprises.
However, it is a victory that in the long run can be very expensive, because if at this moment the central banks have become essential, but they have also crossed the red line of their politicization, with policies that go far beyond the monetary one, which is at the heart of their existence. Today the main central banks have turned into gigantic economic policy machines, acting on the basis of political power and creating a dependency on the market, due to low interest rates and excessive liquidity, which will hardly end well, but in a hyper global financial crisis, it will be another story, the history of markets for many centuries would say, the “fall” of Central Banks.
Photo by Obi Onyeador.
