Any time a central bank speaks there are scores of investors lined up and waiting to listen. Each is interested in any number of tidbits that might have a plethora of implications affecting his positions and portfolio. Even after the long-winded speeches and discussions, that action does not stop as investors continue to try and anticipate the next set of policies.
My readers are well aware of how keen I find the writing to be of Paul McCulley, managing director of PIMCO. In his global central bank focus article, Paul ventures beyond the normal apparatus to discover what he labels a "moral hazard."
My Friday letter, Thoughts from the Frontline, has been written about some of the data variables that affect the decision making policies of the Fed. I believe that Paul's piece will shed some light on what the Fed might be facing, as well as add some global perspective to the central banks as a whole. May you find this editorial to be helpful in your outside the box thinking.
John Mauldin, Editor
Outside the Box
Global Central Bank Focus
Moral Hazard Interruptus
Over the last year, monetary policy makers and market practitioners have spent a huge amount of mental energy, loads of computer time and gallons of ink examining the conundrum - the putatively too-low level of long-term real interest rates, both absolutely and relative to real short-term interest rates. We've certainly done so here at PIMCO, and our empirical findings mirror those of others,…