How News Affects Markets

Clarity in this sense has trended upwards over the past century.

When I studied monetary policy in the 1930s, I noticed that the policy environment was far more unstable than today, and also that the stock market was far more volatile than today. The average daily move in the DJIA was around 2%.

Finally, and excluding U.S. jumps, leading newspapers attribute one-third of jumps in their own national stock markets to developments that originate in or relate to the United States. The U.S. role in this regard dwarfs that of Europe and China.

This fits in with David Beckworth’s claim that the Fed is a monetary superpower due to the dollar’s role in the global economy. (Eurozone GDP is similar in size to the US GDP, but the ECB is far less influential.)

PS. There are schools of thought on both the left and the right that claim monetary policy doesn’t matter, that it’s just swapping base money for T-bills. They have no explanation for these empirical facts, and presumably either deny them or ignore them.

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