Unmixed Signals

In mid-December, the Bank for International Settlements (BIS) published its regularly quarterly update. It was just in time for the current bout of “overseas turmoil” which included a lot that wasn’t overseas. The BIS noticed, I’m sure reluctantly.

Financial markets swung widely, eventually netting a sharp correction, during the period under review, which started in mid-September. Asset prices fell across the board and US government yields widened in October before retracing that increase and dropping further as the selloff of risk assets spread. Volatility and term premia jumped. A further round of turbulence, this time accompanied by lower yields, hit markets in December.

The anticipated BOND ROUT!!!! of normalcy further postponed. The wild swings in markets would only get wilder following the publishing of the report. This wasn’t supposed to happen, not in 2018. Globally synchronized growth was going to carry the global economy if not all the way back to pre-crisis conditions than at least somewhere close enough to them.

Raw disappointment oozing out from each of their words, the BIS continued:

The repricing took place amid mixed signals from global economic activity and the gradual, yet persistent, tightening of financial conditions.

When any official, political outfit characterizes anything as “mixed signals from the global economy” they don’t actually mean mixed. The correct word to have used in this context would have been contradictory. They mean “mixed” in the sense that the evidence is increasingly going the other way which doesn’t comport with the hugely optimistic standard narrative.

The data is negative but the narrative remains positive nonetheless. That kind of “mixed.”

The title of their summary is, after all, Yet More Bumps On The Path To Normal. If they mean “normal” in that the global economy can never really get going because it lurches from downturn to low-grade upturn and back again, then, yes, that’s what we have in front of us here. Eurodollar normal. They don’t mean that version, however.

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