Courtesy of Mish.
In response to “Bubbles Ben to be Replaced by Calamity Janet”, reader “Robert” responded via email “Try thinking of the Fed not as headed by inept persons, but as run by persons whose deliberate intention is to bring about the sort of destruction it is in fact bringing about.“
I replied “Don’t buy it. I am not a believer in such conspiracy theories. But I am a big fan of Occam’s Razor: The simplest workable theory is most likely to be correct. In this case, the simple theory is: They are economic idiots.“
Breathing Room for Emerging Markets
Some people think the Fed’s actions are purposeful, but in a favorable sense. For example, please consider Bernanke Buys Time for Brazil to India as Rupee Leads Rally
The Federal Reserve’s surprise decision to refrain from scaling back monetary stimulus provided a respite to investors in emerging markets, where currencies are in the midst of their worst rout in two years.
“It gives everyone some breathing time,” Denise Simon, an emerging-market fixed income manager at Lazard Asset Management, which oversees $147 billion, said by phone from New York. “It certainly takes some of the immediate pressure off the more vulnerable countries. Emerging markets will continue to correct on the upside as the result.”
The rupee strengthened 2.6 percent against the dollar at 12:18 p.m. in Hong Kong and Thailand’s baht appreciated 2.1 percent, heading for the biggest gain in six years. The Malaysian ringgit increased 2.3 percent and one-month non-deliverable forwards on the rupiah rose 2.2 percent. The Jakarta Composite index jumped 4.4 percent and India’s S&P BSE Sensex Index added 2.9 percent.
The Brazilian real and Turkish lira jumped more than 2 percent yesterday, while the Indian rupee led gains in Asia today, after the Fed said it will keep buying $85 billion of debt a month. Indonesia’s Jakarta Composite Index advanced the most since October 2011 and JPMorgan Chase & Co.’s index for dollar-denominated bonds in developing nations posted the biggest rally in almost three months.
Fed Chairman Ben S. Bernanke held back from paring monetary stimulus to support economic growth, soothing investors who had dumped emerging-market assets since May as higher U.S. interest rates sparked capital flight. A group of the 20 most traded emerging-market currencies lost 7.4 percent between May and August, the most in two years.
The decision came at a time when economic data from China to Brazil are showing signs of improvement and helps countries most dependent on foreign financing such as Brazil and India, said Simon.
Real, Rand Strengthen
The rupee strengthened 2.6 percent against the dollar at 12:18 p.m. in Hong Kong and Thailand’s baht appreciated 2.1 percent, heading for the biggest gain in six years. The Malaysian ringgit increased 2.3 percent and one-month non-deliverable forwards on the rupiah rose 2.2 percent. The Jakarta Composite index jumped 4.4 percent and India’s S&P BSE Sensex Index added 2.9 percent.
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