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Breakingviews: Humility lessons for bankers

Thursday, Jan 30, 2014 - 04:26

Jan. 30 - The turmoil in emerging markets should teach central bankers some lessons in humility, says Breakingviews economics editor Edward Hadas.

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On breaking -- today why matching market turmoil should teach Central Bank is a lesson in humanity. Like. Think he's -- much joining us talk with the Central Bank -- story I can't speak. Crux of the story he is not today the national war they do it's difficult find the right solution. Yes -- you know you have these the monetary authority's central bankers. In the developed world. It done this very extravagant extra extraordinary. Policy for five years as your rates passed -- to easing and now the Fed is starting to pull back against that from now. That's causing a lot of auctions. And in response to the emerging market. Several emerging market central bank of Iraq increasing interest rates. I'm and it has had very very little facts right Turkey and South Africa Turkey and South Africa also Brazil and India. And so we we seem to have is tools that are inadequate to the kind of forces of the financial markets. And to you indeed. It's not quickly with the tools actually did a whole lot for the -- that -- the genuine economy either the -- -- So central bankers who have often portrayed themselves and most glowing terms. Have not releasing too don't seem to be in control of the situation where that would make everyone a lot happier. So what do you do to actually fixes the problem well over time what you can view is to develop new techniques and one that are really old techniques when that most people. In this sort of anti Central Bank world think about its capital controls which went way out of style. On the few years ago but. I'm a lot of hot capital coming in to countries like Turkey in South Africa. And then leaving and both of those force flows are very destructive. So. It looks increasingly like a good idea to have some kind of restraints on capital in and out of countries. And at various times that isn't gonna happen overnight in fact that's still on non consensus view for now basically are gonna have to be able to do is wait. You'll see more increased rate increases and we'll see how we might see the Fed retreating on its. In the pace of tapering. They didn't do it yesterday but they -- yet if the emerging markets get worse that. It's this just within the conventional tools that are right now being used certainly not much to do except. Try rate increases and possibly trying to slow even more the pacers retreat from exceptional policy. Right McCain used to we have today is that Deion share from breaking views I guess speed -- think the budget is on its shares are down 6%. You know it's not a surprise and if only 60% of their business is exposed to imagine lock -- so why isn't being hit. So Hala well we are a little puzzled by that to be honest I -- and it doesn't look like it's just investors are just thinking emerging markets. And I knew exactly. -- and -- here has been an emerging markets play and in that rapid mind -- investors are capable. Oh your last fifteen years of strategy that we don't think so much of it having applauded for a long time. We also think that ideology is is now out grown on. It's merger phase it's it's doesn't planning anymore mergers and that investors are skeptical of companies in this the uncle and his spirits beverage business. They're skeptical of their ability to grow without acquisitions. And especially emerging market story is going suit gets to do is deteriorating. So we thinking that I'm that this to sort of combination of doubt and fear has not let -- talk sharp drop. And it just quickly how much is as down to the fact that this is cracked down in China on gift giving. That's part part of it and it very anxious to see how long -- last. Thank you very much set and -- hottest breaking these economics at percent. Itself and now and formal agenda setting financial -- want to US breaking the show every day at 12:30 eastern -- that he GMT. I'm imagining all. That's choices.

Breakingviews: Humility lessons for bankers

Thursday, Jan 30, 2014 - 04:26

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