This week marks the tenth anniversary of independence for the Bank of England. Our hats should be off to the man who has led this institution for most of this period, Mervyn King. In some capacity, he has been present at every Monetary Policy Committee meeting since independence. He is Britain’s Alan Greenspan albeit without the rock star adulation.
King has been instrumental in leading a mighty NICE economy for Great Britain. NICE is the acronym for the Non-Inflationary Consistent Expansion. This British stability is something that all of the developed economies have seen over the last decades. Economists have begun to call this period the “Great Stability” or the “Great Moderation”. It has been an extraordinary period of low and stable inflation coupled with stable growth. It may not be a coincidence that this has been a period of strong independent central bank leadership.
But what is good for the general economy is not always good for traders. A NICE economy is great for buy and hold investors especially in equities. You earn dividend yield and consistent equity appreciation as the equity premium declines. Earnings are stable and predictable. The nice economy has again placed London in the forefront of capital markets. The place of no surprises is a great location for centering a financial business.
For those who make their money through trading volatility or the vagaries of trends and reversals in pounds and gilts, this has been a more difficult time. While the pound has been on a consistent uptrend, volatility has been stable and there has been little in the way of opportunities to move back and forth between long and short positions. Interest rates have seen a moderation in volatility and stayed more range bound.
The economy may move from NICE to nasty and take a DIVE – Disruptive Inflation and Volatile Economy, but right now we should salute the independent central bankers in England.
King has been instrumental in leading a mighty NICE economy for Great Britain. NICE is the acronym for the Non-Inflationary Consistent Expansion. This British stability is something that all of the developed economies have seen over the last decades. Economists have begun to call this period the “Great Stability” or the “Great Moderation”. It has been an extraordinary period of low and stable inflation coupled with stable growth. It may not be a coincidence that this has been a period of strong independent central bank leadership.
But what is good for the general economy is not always good for traders. A NICE economy is great for buy and hold investors especially in equities. You earn dividend yield and consistent equity appreciation as the equity premium declines. Earnings are stable and predictable. The nice economy has again placed London in the forefront of capital markets. The place of no surprises is a great location for centering a financial business.
For those who make their money through trading volatility or the vagaries of trends and reversals in pounds and gilts, this has been a more difficult time. While the pound has been on a consistent uptrend, volatility has been stable and there has been little in the way of opportunities to move back and forth between long and short positions. Interest rates have seen a moderation in volatility and stayed more range bound.
The economy may move from NICE to nasty and take a DIVE – Disruptive Inflation and Volatile Economy, but right now we should salute the independent central bankers in England.
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