The Competitive Devaluation of a Meme
Today, in the most telegraphed CB move in history, the ECB outlined a 60B/m NCB bond buying program. The pending action quickly morphed into television and social media labeling of a "Competitive devaluation of the currencies." Say WHAT?
The topic could be expected by book selling "Quasi-conomists" and yellow metal hugging Chicken Little's, but even "veteran" currency anchor Sarah Eisen promulgated the myth. "Currency Wars" retweeted through "finance Twitter all day. That the most significant recent global Fiat event was last week's crash UP re-pricing in the Swiss Franc mattered not to the accepted theme.( A policy of artificially lowering the Franc's value was aborted. ) If a 24 cent jump in the your currency is a competitive "devaluation", then we're in bigger trouble than I thought.
I could not help but wonder at the tons of luxury leather boots Italy would be dumping on Spain ! Except they won't be. Because, contrary to the phoned in pseudo-analysis of the day - There is Not a competitive currency devaluation going on. As for ECB QE, I'm lost to if it will help Europe. As I said to Lorcan Roche Kelly (who knows far more than me on this), since National CBs do the bidding it looks like PIK (payment in kind) bond buying to me. I am a tad nervous that such an obviously flawed narrative as "Currency Wars" goes unchallenged, however. Also, the Fed is still poised to attempt a dismount with a much higher difficulty factor than the ECB's highwire into LSAP. In fact, no one has ever "landed" it.
Several years ago, @Fullcarry and I wondered what America would think of "looking like Japan." Contrary to the assumed slight, we focused on America's reaction to relatively low unemployment, a couple points of GDP growth and nary a glimpse of inflation. I guess the answer is totally confused and completely unacceptable.