I was reading online today an article about the unintended consequences of the massive (and non-traditional) approach the Federal Reserve has taken to stimulate the economy, namely buying 83 billion dollars worth of bonds every month (at least I think that’s the number).
I traded interest rate futures for eighteen years and while I didn’t understand everything about what I was doing, I had to understand some of the jargon and had to try to make money trading opposite people who supposedly were working the levers of change when it came to interest rates, Federal and private.
Even with that background and experience, I was lost reading today’s article. I have no idea what currency interventions and/or currency policies other countries might be pressured to undertake to offset the negative impacts of our government’s policies on their national financial well-being. Near the end of the article, after I was totally confused and frustrated by the dense writing, the article’s author (and shame on me for quoting the article without crediting him or her) said this:
Many analysts worry about the efficacy of such policies, given the long history of failed currency interventions around the world that often, by revealing a country’s financial weakness, have attracted speculators rather than deterred them.
The deputy central bank governor of Brazil, which has employed capital controls to stem rapid inflows in recent years, suggested they have likely helped to temper monetary pressures the country is now facing. Luiz Pereira struck a lighter note in making his point.
“If you’re throwing a party and you want to be more selective in allowing guests into your own party, probably you will have fewer people running for the exit doors if something goes terribly wrong,” he said.
“If no restrictions were placed on the guest list,” he continued, “the party gets too wild too soon.”
“When you try to select your guests, you want the ones who come [to] stay longer without getting too drunk.”
(and that was the last line of the article)
The temptation is always to “explain,” but sometimes you just have to tell a story and when you get to the end, turn off the mike and walk away. Congratulations Luiz Pereira – well done! (and thanks for clarifying Brazil's actions)
I traded interest rate futures for eighteen years and while I didn’t understand everything about what I was doing, I had to understand some of the jargon and had to try to make money trading opposite people who supposedly were working the levers of change when it came to interest rates, Federal and private.
Even with that background and experience, I was lost reading today’s article. I have no idea what currency interventions and/or currency policies other countries might be pressured to undertake to offset the negative impacts of our government’s policies on their national financial well-being. Near the end of the article, after I was totally confused and frustrated by the dense writing, the article’s author (and shame on me for quoting the article without crediting him or her) said this:
Many analysts worry about the efficacy of such policies, given the long history of failed currency interventions around the world that often, by revealing a country’s financial weakness, have attracted speculators rather than deterred them.
The deputy central bank governor of Brazil, which has employed capital controls to stem rapid inflows in recent years, suggested they have likely helped to temper monetary pressures the country is now facing. Luiz Pereira struck a lighter note in making his point.
“If you’re throwing a party and you want to be more selective in allowing guests into your own party, probably you will have fewer people running for the exit doors if something goes terribly wrong,” he said.
“If no restrictions were placed on the guest list,” he continued, “the party gets too wild too soon.”
“When you try to select your guests, you want the ones who come [to] stay longer without getting too drunk.”
(and that was the last line of the article)
The temptation is always to “explain,” but sometimes you just have to tell a story and when you get to the end, turn off the mike and walk away. Congratulations Luiz Pereira – well done! (and thanks for clarifying Brazil's actions)
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