It's not central bank policy per se that makes the price of the market go up or down, it's Common Knowledge regarding the ability of central banks to control economic outcomes that makes the markets go up or down.

-Ben Hunt

The market has been locked in a trading range for an extended period of time. Is it because the market is still in the process of vetting both the taper and Janet Yellen or is it simply Le Chatelier's principle's market clearing effect? And, while there has been, both a policy change and a changing-of-the-guard at the Fed, it is still unclear as to whether there has been a regime change in the market. What we are left with is a stable equilibrium where competing influences are balanced, resulting in no net change. While it is virtually impossible to predict, it will certainly be interesting to see, what shock to the system will have enough influence to disrupt this equilibrium.

Stefan Jovanovich writes:

What the market may, in fact, be forecasting is the beginning of a shift in sentiment to a common opinion that the government cannot and should not "control economic outcomes". What we now see as the classical liberalism of John Stuart Mill - laissez faire - was hardly the product of benign progress. It came to be received wisdom only after a deep skepticism had taken hold of the country. People whose families had seen a 100-fold increase in public indebtedness over the previous century had had enough when that spending to defend Britons had ended not in freedom but in the loss of traditional liberties.

I leave it to the readers of this site to gauge how the exact parallels between the post-Waterloo period and our own; but there is no question that the rise in the sentiment for "free trade" would not have occurred without the reaction to Robert Jenkinson's ministry. The suspension of Habeus Corpus in the U.K in 1817 (which had not happened during the Napoleonic Wars) was a shock; the adoption of the Six Acts was the last straw. Between them they produced a financial and political revolt that ended with the bi-partisan abolition of the Corn Laws and the adoption of the Bank Charter Act (think the repeal of the Internal Revenue Act and the enforcement of the gold clause in the original Federal Reserve Act for the appropriate modern American comparisons).

For those who may not know them, the Six Acts were these (my numbering):

1. The Training Prevention Act - which made attending a meeting for the purpose of receiving training or drill in weapons a crime punishable by transportation.

2. The Seizure of Arms Act. It allowed local magistrates to order the search of any private property for weapons, the seizure of weapons and the arrest of the owners.

3. The Misdemeanors Act. It restricted the availability of bail and allowed summary trial.

4. The Seditious Meetings Prevention Act. No meeting of more than 50 people could be held without the permission of a sheriff or magistrate if the subject of that meeting was "church or state" matters. Attendance by people not inhabitants of the parish was a violation.

5. The Blasphemous and Seditious Libels Act confirmed that political speech could be a crime; punishment was increased to fourteen years transportation.

6. The Newspaper and Stamp Duties Act required all publishers to post a surety bond and pay a duty for any publication (previously only "news" papers but not journals of opinion had been required to pay a duty; neither kind of publication had had to post a surety bond.)

Gary Phillips comments: 

Perhaps they're taking a knee, but I wouldn't count out the perception that Fed policy was responsible for sanguine market outcomes; if that wasn't the case gold would be trading at much higher levels. The QE narrative continues to persist and effectively shape our world today and like all good narratives it succeeds because it has an intrinsic ring of truth which speaks to broader interests on an intellectual and emotional level and even though, it always coincides with flexionic goals and preferences.

Stefan Jovanovich writes: 

During the century in which the Bank of England's notes were taken to be as good as gold, the metal's price declined. The market expectations are never true in a compass sense; they are always shifting - sometimes against insiders' certainties. The bets made against the dollar during and after the Civil War did a great deal to weaken the City's dominance over American finance. If the flexions in London and Amsterdam and Vienna and Paris, the Morgan Bank would still be a mere correspondent.

Anchors drag.

David Lillienfeld writes:

A number of railroad bankruptcies helped, though they also affected the Dutch, not just the English.


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