2020 in dettaglio: per le Banche Centrali è una "lose-lose situation"

Chi sia Mohamed El Erian i nostri lettori lo sanno da un decennio, e altri lettori lo hanno scoperto più di recente, quando lo hanno ritrovato in prima pagina sul Corriere della Sera (nel 2019, come abbiamo raccontato qui nel Post.

Noi utilizzeremo alcuni brani di una sua intervista della scorsa settimana per offrire ai lettori del Blog una anticipazione dei temi che ritroveremo nel 2020 come determinanti per la performance dei nostri portafogli.

In questo terzo Post, utilizziamo un brano della intervista a El Erian per spiegare la ragione per la quale, nel 2020, non ci sarà alcun intervento delle Banche Centrali a “salvare” i mercati finanziari dal loro naturale percorso.

In the aftermath of the financial crisis, you introduced the term «New Normal». More than a decade later, this concept of a new economic reality, defined by slow growth and super low interest rates is still widely accepted. Are we ever going to escape the “New Normal”?
I remember exactly where I was at that time. It was in January 2009 and I was at a business meeting. People said: “This is not normal; this is not normal”. So I thought in my mind: “Yes, this is not normal, so it’s a new normal”. The idea was to warn against a cyclical mindset. People in the industrial world are used to live in what’s called a cyclical space. But this is not a business cycle.

What is really going on?
What’s going on in the advanced world is structural. It’s about productivity and growth potential. If you run complex liberal democracies at low growth for a long time, things start to break. So as good as the «New Normal» was for the last ten years, I don’t think it will expand the next ten years. We’re going to see a tip, and in Europe we’re getting much closer to it: If Europe hits stall speed in 2020, which is a growth rate of below 1%, the chances of a recession are increasing. Yet, with better policies, Europe can also bounce back quite quickly. So Europe is really heading for this tipping point or T-junction. The same is true for China and the US. But Europe is most advanced in that process.

In which direction do you think Europe is going to go?
The good news is that there is now an awareness that we cannot rely on negative interest rates. People understand that, at some point, negative interest rates become counterproductive: Savers save more rather than less because they’re not getting paid on their savings. You encourage too much risk taking in the financial world. You depress productivity because you allow for zombie companies to continue. And, you encourage inequality of wealth. So there is an awareness that we can no longer rely simply on the ECB. Also, most European economists agree on what’s needed. But it’s all an issue of implementation. What many of my European friends are most afraid of is that we don’t get implementation until things get a lot worse, until Europe actually goes into a deep recession.

Yet, investors are celebrating easy monetary policy once again. In the US, the Federal Reserve has cut interest rates three times this year and is injecting a ton of liquidity into the financial system.
It’s amazing: Today a year ago, the Fed raised interest rates once more and indicated continuing raising them in 2019. It also indicated that quantitative tightening was on autopilot. Now, they’ve lowered interest rates three times this year, and they started QE again, whether they call it QE or not. Interestingly, it’s not the economy that caused this turn. What changed was this very dramatic market dislocation in the fourth quarter of 2018. I call it a dislocation and not a sell-off because what Central Banks worry about is the functioning of the financial system. And, behind the 20% drop in the S&P 500 a year ago was an indication that certain segments of the financial markets will become illiquid. So what the Fed’s U-turn shows you is that the system has become addicted to continuous liquidity injection.

What does this mean for monetary policy going forward?
Central Banks increasingly are in a lose-lose-lose situation: They cannot step back and normalize policy, because the system is too addicted to liquidity. And, if they try to step back, they risk market dislocation. That’s the first loss. On the other hand, by doing more, they risk being counterproductive. So even though they're forced to do more, they’re really uncomfortable about it. That’s the second loss. And finally, where they are now, they’re subject to attack. So they lose by going back, they lose by going forward and they lose by staying in an uncomfortable position. That’s why this hand-off to fiscal policy and structural reforms is so important.

What is the Fed going to do in this kind of pickle?
I don’t think we’re going to see a hike in 2020. The most likely outcome is that the Fed stays on hold for the whole year. If there is a change, it will be lower interest rates.