Alas Babylon part 2

The popularity of the "Saw the Woman in Half" trick known as Operation twist is dwindling before  its even executed. Criticism of more failure at the Fed would be rampant without a clear policy metric of success. The growing Fed speak gobble-dee-gook goes like this: "Conditioning the outlook on explicit numerical values for unemployment and or inflation."

In English, that means tying policy promises and actions to a Nominal GDP result. The problem is, and will be for some time, that monetary policy is not the solution. The pedestrian and populist deficit fear mongering will not help obtain the "conditioned explicit numerical value."  The post-crisis landscape will continue to be littered with a massive stock of available, yet un-demanded credit. A consistent comparison to the Japan experience lies ahead.

In the near term, equities seem amenable to another short burst of optimism as concerted Euro/US monetization shifts to hyper-drive. However, as we have stated before, the relationship between stock index prices and growth is highly elastic in a global monetary regime. Sooner or later, you have to deliver the "explicit numerical value (read: growth).

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