I still remember the time when Wall Street vibrated and reacted sharply to “offal” like the size of the briefcase that Alan Greespan took to the FED meeting, if it was too crowded it would mean something, like cutting or raising interest, a suitcase it was emptier to maintain, and so days of high volatility were made. This is clear that imagination and necessity did not open doors to central banks to be the owners and lords of the bigger picture, with the financial crisis of 2008, the role of these financial monsters was clearly leveraged, with the change of historical mandates for action to include an implicit, “save” the economy, doing in crooked lines the work that the governments failed or did not want to do, we will see at what cost, in addition to their politicization, which led to the loss of their practical independence.
And if it is true that the world economy was effectively saved by measures absolutely unthinkable at the beginning of the century and that relegated interest rates to the background, such as the purchase of private debt by the ECB, which led to grotesque balance sheets in excess of $ 4 trillion in the main central banks, the fact is that the economy and investors were addicted to healing, the reduction of balance sheets did not occur and as such we have another crisis in hand and still have almost all the measures to resolve the previous one in operation, that’s why when the FED cut interest rates from 1.5% to 0% in a very short time, sentiment did not improve, more was needed and few have been the days when the most important central bank in the world has not announced measures to stem the bleeding of optimism.
Photo by Martin Sanchez.
Yesterday and given the evidence of what is clear today, this epidemic will cause the biggest economy in the world, the Fed basically went “all in”. He repeated the memorable words of Mario Draghi, when many analysts say he saved the Euro, that is, “we will do whatever it takes”, which in the case of the North American central bank was saying to announce a program of quantitative easing without limit in the amount and with very few in the conditions, this because it even refers to the possibility of loans to “Main street”, that is to say to the citizens.
In the coming months we will see if the “biggest bet of all time” will be the panacea for this crisis as the previous “biggest bet” has temporarily solved the problems of the financial crisis. It is still too early to draw conclusions and the markets will hardly continue extremely volatile in the next two months, because it will be the window to have a more qualified perception of the direct impact of the epidemic and the indirect impact, that is, of the measures that States are implementing to try to slow the progression of the virus.
