Financial Times/Philip Coggan/7-8-2022
“A Tinkerbell moment may have arrived as investors are unconvinced that monetary policy can tame inflation. In JM Barrie’s play Peter Pan, the audience is asked to clap if they believe in fairies. If they fail to clap, the character Tinkerbell the fairy will die. A Tinkerbell phenomenon is one that exists only because people believe in it. Central banks in the developed world are experiencing such a moment.”
USAGOLD note: Ever since Greenspan’s tenure at the Fed, the markets have believed that the Fed has its back. Now, says Coggin, that has all changed. Instead he says central banks expertise is now being questioned. “They have caught out,” he says, “by the surge in inflation over the past 12 months and have been slow to push up interest rates to counter it.” Now investors are wrestling with two new and nettlesome market realities. First, the central bank put on the stock and bond markets appears to be a thing of the past. Second, central banks’ approach to fighting inflation is increasingly being questioned as being equal to the task. A case in point is Bank of America’s recent warning (Please see below.) that it will be difficult for the Fed to bring down inflation over the next two years. (
