- Central Bank Currency Wars Have Engaged The “Nuclear Option”
by Tyler Durden, www.zerohedge.com
By former FX trader and current Bloomberg commentator Richard Breslow
The Evil One
An enduring curse of this financial crisis is the inability of markets to disengage from the clutches of the correlation of one. We see it ad seriatim, often day to day:everything is wonderful, all hail the central bank (Friday); the world is crashing, these empty suits are running us over the cliff (Tuesday).
Having gone on long enough, this phenomenon has turned traders into inveterate cynics who know the price of everything, and the value of nothing.
Markets function effectively only when relative value among assets has some measure of reality. Discounting future returns in a world of zero and negative interest rates is a Sisyphean task in the theater of the absurd. In today’s world, we reduce everything to buy or sell the lot.
You hear the term “safe haven” constantly. It is meaningless in a negative-rate induced carry trade world. No one is buying safety in JPY on bad days. They are busy getting blown out of the high risk stuff they funded with minus 0.1% rates
Currency wars can be nasty and don’t always have a winner. When they are waged with increasingly negative rates, it becomes the nuclear option.
Central banks embracing uncontrollable volatility and the evil of one.
When “forecasters” tell you oil is going to go up or down by 50% this year, they are not just trying to hit a home run, they will be able to dine out on for the next five years.