Sept Market Review: The BoE returns to QE

The BoE returns to QE, ECB & Fed are not far behind

October 02, 2022

Friends and associates,

Central banks’ appetite for monetary integrity started to fray in September 2022 as the BoE restarted its QE programme in the midst of bond market volatility and resulting pension fund liquidity pressures. Developed Market bonds and currencies - the foundation of the financial system - are trading like Emerging Market, which is not a healthy sign. Central banks continue to use money as a tool to maintain political order, calling the foundation of the financial system into question. TLDR: Central banks’ inability to maintain monetary integrity creates a compelling argument for alternative monetary technologies, like bitcoin, and that case will grow stronger still as central banks pivot to looser monetary policy over the coming quarters.

    Conclusions

    • Merge: technical success but fully priced

    • Extreme DM bond and FX reveals systemic fragility and confirms monetary regime change theme

    • Unprecedented bond weakness during an equity bear market

    • BoE caves, restarts QE to ‘bailout’ troubled pension funds

    • Europe expected to follow the UK

    • Unsound monetary and fiscal policies maintained due to energy crisis

    • The Fed is not far behind as bond market volatility ratchets up

    • RUB out-performance reveals importance of scarce assets and fiscal prudence

    • Relative bitcoin strength emerging as correlation to equity markets declines

    It would be a lie to say that a bear market does not trigger difficult searching questions. It hurts to experience deep and extended declines in net worth and it makes sense that one should question ones decisions under these conditions. But in writing these articles, pulling the lense out and getting a sense of the broader macro conditions my conviction is reinforced again and again. Investing in sound money assets is not only as attractive an investment opportunity as ever but it is morally expedient to be working on a solution to some of the worlds biggest problems because it is clear as day that are politicians are not.

    See you next month.