Will asset prices survive the end of money printing?

TLDR & TLDL: We could be about to see another ‘Taper Tantrum’ as investors globally who have become used to constant and huge money printing by central banks over the last 13 years begin to doubt themselves. They shouldn’t worry so much. History tells us: there’s always a bailout.

Earlier this morning US Federal Reserve Chair Jerome Powell said the world’s biggest central bank should speed up its ‘tapering’ of money printing and bond buying because inflation now appeared more than transitory than the Fed thought earlier this year. US stocks fell as much as 2% this morning, although the US 10 year bond yield actually fell five basis points to 1.45% on a flight to quality and stubbornly low inflation and real yield expectations (more on why that’s happening below the fold).

The wisdom of the crowds in the world’s most liquid financial market (US Treasuries) certainly don’t believe inflation is getting out of control, or at least believe the Fed will squash it immediately. (See more of my analysis below the paywall fold on how a taper tantrum might play out for interest rates and asset prices. I also take a look at the latest signs bank mortgage lending here actually sped up in Oct and why Wellingtonians are putting more of their houses on the market.)

The chair of the Fed Reserve, Jerome Powell, told a Senate committee hearing overnight that the world’s biggest central bank expected to speed up its ‘tapering’ of money printing and bond buying because inflation now appears more than transitory. Photo: US Federal Reserve

Elsewhere in the news overnight and this morning:

• European inflation hit a euro-era high of 4.9%, but the ECB remains in ‘Team Transitory’ and continues to print €80b a month;

• Moderna’s CEO warned vaccines will need to be tweaked next year to deal with omicron, which he told the FT-$$$ was ‘not going to be good’;

• Simon Bridges looks set to be named as National’s finance spokesman at number three on National’s list as part of deal done yesterday with Christopher Luxon on Politik-$$$ and NZ Herald-$$$;

• CoreLogic’s House Price Index out this morning showed annual inflation slowed in Nov for the first time since Aug, but only to 28.4% from 28.8% in Oct. Interestingly though, listings in Wellington are up sharply (see my fuller report below the paywall fold for more on that); and,

• look out below the paywall fold for the scoops and must reads elsewhere this morning.

Coming up today, I’ll be watching for more news from Christopher Luxon on who National’s spokespeople will be and doing my Spinoff podcast for release on Friday. I welcome comments and questions below from paid subscribers.