Marshall Gittler was interviewed by Reuters on 26 February 2016

FXPRIMUS’ Head of Investment Research, Marshall Gittler was interviewed on Reuters on 26 February 2016. With over 30 years’ experience researching the financial markets, Marshall’s views are often sought by the international media. In line with our ongoing work to educate our traders, we are pleased to provide the transcript of a Question and Answer session between Marshall and Reuters Financial Journalist Bob Fraser. Stay up to date with market movements and to make informed trading decisions and visit our education pages for special reports, market insights, videos and more.


Q&A Interview with Marshall Gittler and Reuters’ Financial Journalist Bob Fraser

Can central bankers really do anything more to boost the global economy. Does it not now require the intervention of finance mins from the fiscal side – despite the widespread austerity being practiced in so many countries?

No, I don’t think there’s any major country eager to increase its spending. Certainly not the US, at least not until after the election. Not Germany the way it’s currently constituted, although the refugee crisis may force Europe to spend more. Japan is already running an incredibly loose fiscal policy. That leaves China. There are signs that they’re trying to boost growth there through increased debt, but that runs counter to their other goal of restructuring the economy, so I’m not sure how far they can go with that.

How seriously should we take the phenomenon of negative interest rates – as in Japan, Euro zone – do they do more harm than good?

They seema to have reached a point of diminishing returns, where fears of the damage that they could do to the financial system by cutting into banks' profits are outweighing any good that they do for the economy. Furthermore, there’s no sign that they are being passed along to companies in the form of lower interest rate. In any event, one main way that they’re supposed to help countries is by causing their currencies to depreciate, and of course all countries can’t do that at the same time – the impact of one country’s negative rates would simply cancel out the impact of the other countries. I think that’s one reason why the move into negative territory by the Bank of Japan had such a dramatic unexpected result.

Do you think the Fed is considering such a move?

They may be examining it theoretically in order to be prepared for all contingencies, but I don’t think they are seriously considering it. On the contrary, the question they are still debating is whether to tighten further. Only once they decisively decide “no” to that, they might consider whether to ease further. But so far, I think the debate about whether to tighten is still alive and well, so it’s far too early to discuss whether to loosen.

Beggar my neighbor currency wars – who wins?

Nobody! They just lower interest rates into negative territory around the world, but the moves offset each other and nobody gets a lower exchange rate. However, there is one country that loses:  the US. Since the US has in effect declared “unilateral disarmament” in the currency war, its currency is likely to appreciate. I guess in that respect everybody wins vs the US, but nobody in particular wins among the participants. China could probably win if it wanted to, simply because it’s the biggest participant, but so far they have been reluctant to see their currencydepreciate. And with the trade surplus there at a record level and growing, it’s hard to argue that their problem is an overvalued currency.

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