The Federal Reserve announced last Wednesday that it is leaving the federal funds rate where it is, for now. While the United States is pondering interest rate hikes, other parts of the world are plunging further into negative territory. Last Thursday, in an attempt to bolster Europe’s weakening growth and spur inflation, the European Central Bank (the “ECB”) lowered its deposit rate by another 0.1%, pushing its deposit rate down to -0.4%.
With other central banks lowering rates into the negative, will the U.S. follow? Why is this happening? What could go wrong? How will this affect our banks? Click through for three things you should know about negative interest rates.Continue Reading Three Things You Should Know about Negative Interest Rates
We may be approaching a tipping point where the burden of the new federal regulatory state, purportedly designed to make our economy stronger by making the banking system safer, will begin to demonstrably become a cure that’s worse than the disease. To my eye, much of the new regulatory apparatus feels like political theatre designed to impress the financial illiterate. Random chest thumping for populist cred on the cynical assumption that the system is big enough and robust enough to tolerate all this tampering. Of course, I could be wrong and our policy elites could really be doing all this fiddling from an honest embrace of a simplistic, jejune analysis of extremely complex systems which they largely do not understand. I’m not sure which explanation scares me more.
As we do each year at Crunched Credit, we take the end of a calendar year as an opportunity to stop and reflect on where we are, and what the next year might hold. Recognizing the certainty that a successful prediction is more a random event – a blind cat finding a dead mouse, than a product of wisdom and analytic prowess, it remains an important exercise. It bears repeating that refusing to take a view is actually to make a choice, and a pretty silly one at that. So as we at Dechert churn through our budgeting and planning process for 2016, we will make some assumptions about the economic environment and adjust our planning accordingly. Let’s agree, we are going to be wrong about a lot of stuff – maybe everything – but that fact doesn’t excuse the critical need for having a macro view.
Earlier this year 
As is 
The Great Equity Correction of 2015 that is now being enjoyed by all of us is a correction, and not the beginning, of the Great Bear Market of 2015 (from my lips to God’s ears). It reminds me of just how little we know about how all complex systems, like the global financial market (and don’t get me started on climate), function. Nonetheless, our Regulatory State behaves as if this was not true and as if wise governmental types can simply declaim new rules and regulations to get their very specifically-designed outcomes.