In this anomalous climate of the world economy, actions and reactions are also anomalous. Let's take the dollar. Convention would like that when the horizon of the cycle darkens, capitals run towards i shelter goods, dollar and gold. And at first that's what happened. But then the collapse of Wall Street redirected capital towards other shores (or towards cash), and the prompt reaction of the Fed (a point and a half point less for the Federal Funds) almost eliminated the short-term interest rate differential between the dollar and the euro. The exchange rate with the single currency, which a few weeks ago had "holen" 1,08, rose again, in favor of the euro, to levels prior to the "virulent" crisis, only to then put on the "safe haven" hat again and start a rapid appreciation that puts the countries indebted in dollars in difficulty. The yuan, whose exchange is notoriously controlled, has given way, though price-competitiveness is the least of the problems for the Chinese economy. Thus the exchange rate rose above 7, but far from the highs reached in the acute days of the trade war with the US.
I short rates around the world they are faces down. Not only in the USA but also in Australia and in a multitude of other countries. But, of course, the help to the economy is limited by the fact that the wounds to supply and demand cannot be healed by monetary policy. As expected, i long-term returns they didn't wait for the central banks: it had never happened that the T Bond in 10 years would go below 1% (up to +0,6%), just as another negative record was recorded by Waist (-0,67%): in these cases, the name of safe haven (or "safe haven title") worked. For the btp, which are notoriously not a safe-haven asset, yields are up more than two whole points from their all-time lows (0,84% on Sept. 23, 2019). The counter-current trend of Italian bond yields must be seen in relation to the effects on the public budget (and on the debt) of the measures to support the economy which, however justified, can only damage the image of Italian public finance (the "curse of high debt" strikes again). But to this was added – heavily – one unfortunate sentence of the president of the ECB Christine Lagarde: “We are not here to close spreads”. Then he had to, but three days late, apologize to Italy and to his colleagues in the ECB Council. And the ECB straightened the shot, with extreme effectiveness, by lowering the spread.
Le Central banks, right now, they can only take action to ensure liquidity, and they are doing it with all-round interventions: a necessary condition, this, but not enoughto avoid recession.
Le monetary conditions are stiffening, despite the decline in long-term government bond rates and short-term key rates. The spread for corporate securities, and too much debt fueled by low rates becomes more difficult to service. And to this is added thesoaring cost of equity capital, poisoned tail of stock market crash.
THE imagination au pouvoir still has a few strings to his bow, and we are moving towards the last Thule of economic policy, the «money from the helicopter». He started Hong Kong, now America and tomorrow, who knows… Il Fiscal Compact is now unpacked, and the "firepower" of monetary support is spreading in Europe.
