Submitted by Eric Peters, CIO of One River Asset Management, as excerpted from his latest Weekend Notes letter.
Anecdote
Change is magnificent, he thought, along the stream. Walking. Spring had become summer, lush, in what seemed an instant, little by little, then all at once. The barren banks were now covered in green, dense bramble, concealing.
Across the world change is taking hold. For the entirety of his career, with few exceptions, the study of markets had been an examination of central bank policy. On the Chicago floor in 1989, Fed Funds had been 9.00%, nearly inconceivable now.
The first Gulf War in 1990 had been something, but politicians and politics were of no real consequence when compared to the power of paper. Greenspan lowered rates to 3% by 1993, the Savings and Loan Crisis, the recession. As the economy recovered, he lifted rates to 6.00%, bonds crashed.
And after saving Asia from its 1997 catastrophe, when their governments proved impotent, Alan rescued the US financial system from the stupid geniuses at LTCM. But this amplified the dotcom bubble, crash.
He cut rates to 1.00%, solving a problem of his own creation. Which fueled the housing fiasco. Politicians came and went throughout, wars too, they barely mattered to markets.
Greenspan had attempted to tame the wild, and 2008 was Nature’s response. Professor Bernanke cut rates to 0%, printed, bought, and guided our every expectation. Yellen was no different really.
And the repression they sought in market volatility led to the financialization of the global economy, profound income and wealth inequality.
Which brought forth something not seen for ages, a demand by the people for real change. For a world no longer led by bankers. For politicians to solve their problems, to sooth their fears, to address their grievances.
In the UK, America, across Europe too, Italy its latest blossom.
The long season of central bankers has ended. And politics is again ascendant, in its lush, wild tangle.
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