Must-Read: That the Brexit vote would deliver a substantial leftward IS shock to the global economy was not very foreseeable. But that something could deliver such a shock was very foreseeable indeed.
Do not be reassured by the recovery of the stock market: P = D/(r-g). That the stock market has not gone up as a result of Brexit indicates that the lower interest rates expected in the long run (r) have been offset by the lower growth rate of profit due to additional expected economic weakness (g).
By now Yellen and Bernanke before her have had three full Reserve Bank president-appointment cycles–2006, 2011, and 2016–to get the non-Governor members of the FOMC on the page. It is no longer credible to claim that technocratic imperatives of ideal monetary policy have to bow to the requirements of maintaining committee consensus to promote banking-sector confidence with the Fed.
If financial markets were going to scream any louder that a régime shift to a less deflationary monetary policy régime is called for, how would they do that?
: On Twitter:
This is a big deal: Yield on 10-year US Treasury bond closes at a record low of 1.367% amid global econ uncertainty https://t.co/A33Awb7yed
— John Authers (@johnauthers) July 5, 2016