I made the effort this week to sit through the BOE governors speech on Wednesday, and then did the same for Ms Yellen yesterday, and wow, what a difference between the two addresses. It obviously took a while before the soon to be, Chairwoman settled her nerves, but once in her stride, I thought she played, as we say in the UK - a straight bat – to some difficult and wide ranging questions; the market was largely unchanged at the end, therefore, first job done. Her delivery style is, let`s face it, more dead pan than skid pan, but I guess that`s no bad thing. The governor however, faced a much easier audience, and his languid, quietly competent style seduced the market into re-rating sterling as a tribute to his reassuring maple syrupness! What a guy! Ace Rimmer – eat your heart out!
The governors speech, we have dissected adequately I think, but listening to Ms Yellen, there were a couple of interesting emphases. The summary of her answer to the inevitable `taper` questioning was basically that the Fed would `continue buying bonds`, creditably dull. However this is a situation that month by month continues to expose the paralysis that currently afflicts the Fed. Everyone will breathe a collective sigh of relief (well maybe not the equity market) when this programme starts to unwind; if she is smart she will take advantage of the new broom effect, be bold, point out to her committee that there is now no good time to start tapering, that time has passed, therefore immediately is as good as any. I think it would be the right thing to do; I hope it happens.
The other point that caught my attention was the `too big to fail` discussion. This is a live issue globally and is work already in progress inthe UK and elsewhere. If any good comes out of the catastrophe that was 2008 when history eventually judges us, it might just be kind and say that it was the event that caused us to rethink the role of banks, their relationship with the economy, and more importantly perhaps, the role of the supervisor and the degree of supervision. In the UK, the withdrawal of supervision from the Bank to a newly formed FSA was, as the great former governor Eddie George said at the time `Too heavy a price to pay for the independent setting of interest rates` – how prescient that comment was. Ms Yellen obviously recognises the need to act, but when she talked about amongst other things, reducing their reliance on short term funding, my heart sank. More root and branch reform needed, and less tinkering methinks!
So, a good week for speeches, and a good week for the governor and Ms Yellen. Let`s hope there is a Ronnie and Maggie moment just around the corner, that would indeed be a special relationship!
Off now for a long weekend away, hence the early post! So have a profitable day one and all, and have a great weekend.