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what is going on I mean on the one hand you have an economy which is doing much better than most of the rest of the world and on the other hand you have a cautious fed well whoever believed that central bankers knew what they were doing and if you look at central banker forecasts they've never been terribly accurate but we as a culture tend to place too much emphasis on their wisdom but the fact is that this is if thought correctly I think the more or less reverse of last year when they're jerkin up rates thinking everything's just peachy keen and too strong now they think this that they don't have any great short to intermediate term forecasting ability or even ability to predict where markets would go if you just flash back 11 years to 2008 they completely missed that downturn and at the time Janet Yellen in the October 2008 Open Market Committee meetings was talking openly about how strong he thought things were that they don't have a clue and they never have Oh getting too excited about them is a mistake what's what's influencing them the most though here do you thing because Jerome Powell he was in Paris just yesterday saying that trade developments global growth had caused uncertainties the uncertainties upon which he wants to act so I'm wondering how much his federal policy is weighted towards the global outlook as opposed to what's happening domestically so I think there's probably some of that but I think there's a bigger thing that people miss which is that central bankers almost everywhere pretend to not be political when they're actually secretly political all the time and Powell it will play a very careful role he knows that any move that he makes and interest rates in the period a year from now through the November election will be seen as political they'd like to be quiet than if they possibly can so so they don't get seen as political because the next president Republican or Democrat will reappoint or a point the next head of the Fed they know this inside out you don't get into that position if you're not political looked at the future head of the euro Bank the fact of the matter is in my opinion they over moved last year he's gonna reverse some of that this year get it over and done early enough that it's before the elections and then he doesn't look political next year I think meanwhile he talks to posture that it is true that the rest of the world isn't overall quite as strong as America and Bradley certainly Europe isn't as strong but the fact is Europe is actually moving along Switzerland's growing but slowly manufacturing PMI is negative but on the services side which is you know much bigger over twice as big as manufacturing in Switzerland that the world's positive it's growing but nice we have an almost overall global Goldilocks world of low growth low inflation and otherwise bouncing around a little bit in the balance to make people nervous coming back to Italy talking again about the u.s.
I mean how much do the right cats have to do with national debt which is I mean at a astonishing record high they don't at all I mean simply that's wrong Wow it is true for example that Switzerland has a very low amount of debt relative GDP as a total basically about 27 percent the fact is an America of course is on the high end of countries not the very highest but on the high end of countries the fact is interest payments on either US government debt compared to GDP or compared to tax revenue in total are half of what they were in the early 80s and most of the 90s what people miss that I mean they just miss is that interest rates have come down more than debt has gone up so the in costs of the debt are actually much lower the Fed can control short-term rates but they can't control long-term rates and this feature of interest rates coming down more than debts gone up has made carrying cost at the debt very serviceable over the next decade and so these cuts aren't about death but doesn't doesn't it then I mean lower interest rate don't they fuel even more global debt and I mean the amount of global debt is also at a record level which we just saw there was a study by the International Institute of Finance where it says globally that is that at record levels in in terms of percentage of GDP yes and that's right and then you play the game that says this exactly if interest rates short to long term go up by this amount over this period of time in the future how much does that impact in a negative sense the carrying cost of the debt to the government or to the world depending on what you're measuring and the fact is none of this can possibly happen in a time frame that will impact markets over the next few years it's so far off into the future before short and long term interest rates could rise enough to make the carrying cost of the debt a potential burden with the exception of course of some lesser developed nations but even as I've said before here and as I've written about in my monthly column and Hetal Zeitung even in Italy that people talk about so much the carrying costs of the debt because they've extended the average duration of their debt is at these at lower rates is a fraction of what it used to be I mean it's literally 20 to 30 percent of what it used to be depending on when you pick used to be and therefore it takes a long time to turn that around because of the portion that's long-term debt if I could just jump in at this point I mean we are now in a situation where we have stock markets which seems to be reaching record highs on an almost daily basis and then we have loose monetary policy I mean how much is that driving economic inequality in the world this moment you and I are gonna disagree we do not have loose monetary policy we have low interest rate type money that's a very different thing if we had loose monetary policy which we do not then the growth of the quantity of money would be growing at a relatively high rate compared to GDP growth it is not it is not in Switzerland it is not in America it is not across the eurozone and it's not around the world so there is potential for this we could but-but-but-but yes yes yes but let's be clear what that means by traditional theory and people get this wrong always loose money means you're growing the quantity of money at an abundant rate at a faster rate than the growth of the economy by some market amount if you look at Switzerland I just looked at this not too long ago I'm not current for the last month or so but the growth of the quantity of money more or less equals GDP growth plus about a half a 1% and that is not loose money the fact is in America it's not loose money we're we've got low interest rate tight money because central banks through quantitative easing have flattened the yield curve and at that flattening of the yield curve that causes the banks not to loan money and if the bank won't loan money at an abundant rate if you don't have heavy blown growth you don't get loose money mm-hmm and how does all this affect or why should Switzerland care about what the Fed does later this month you know if I were Switzerland I wouldn't care so much because of what I talked about when I was on the show the last time which is the spread between major developed nation rates relative to the hedging costs of moving money from one country to another if in fact the Fed moves rates up a quarter of a percent let's say all that does is varies where major entity is I mean literally Nestle's the most important singular piece of the Swiss economy where major global companies borrow from and lend to where major global banks borrow from and lend to because they can borrow in any country and lend into any country they operate in this much effect so what are you telling investing what I'm saying to investors is that when sentiment is negative and everything we've been talking about is reflections of negative sentiment when sentiment is negative markets do pretty well by going back to Nestle first I can just look at the stock look at the SPI which is dominated by Nestle and you know the Swiss market because of Nestle has actually done better this year than the US market a point most people don't really think about
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