What we’re reading (9/18)
“Where Has All the Money Gone?” (Project Syndicate). “Amid all the talk of when and how to end or reverse quantitative easing (QE), one question is almost never discussed: Why have central banks’ massive doses of bond purchases in Europe and the United States since 2009 had so little effect on the general price level?…A plausible generalization is that increasing the quantity of money through QE gives a big temporary boost to the prices of housing and financial securities, thus greatly benefiting the holders of these assets. A small proportion of this increased wealth trickles through to the real economy, but most of it simply circulates within the financial system.”
“China Faces A Potential Lehman Moment. Wall Street Is Unfazed” (CNN Business). “The implosion of Lehman Brothers, 13 years ago this week, showed how the collapse of a single entity can send shockwaves around the world. Echoes from that event are resounding today as a massive property developer on the other side of the world teeters on the brink of default. The risk is that the collapse of Evergrande, a Chinese real estate company with a staggering $300 billion of debt outstanding, could set off a chain reaction that spreads overseas.”
“There And Back Again: The COVID Global Market Roundtrip In Map Form” (Vident Financial). “Last year, the world went through a sudden, terrifying pandemic which involved massive government shutdowns and one of sharpest economic contractions in history. Markets responded in kind. And then they made the long trip back home to something resembling normal.”
“Amid COVID Surge, States That Cut Benefits Still See No Hiring Boost” (Reuters). “The August slowdown in U.S. job creation hit harder in states that pulled the plug early on enhanced federal unemployment benefits, places where an intense summertime surge of coronavirus cases may have held back the hoped-for job growth.”
“BlackRock Fund Manager Says He’s Cut Gold Holdings To ‘Almost Zero.’ Here’s Why.” (MarketWatch). “Near term, he [BlackRock’s Global Allocation Fund Manager Russ Koesterich] said there are likely ‘better hedges against inflation in the equity market and rather than own an asset that doesn’t produce cash flow, we would rather hedge some of the near term upside with stocks that have pricing power.’”
