If you have stocks or bonds then you should be acutely interested in the FED right now

Time for an exit strategy?

Last Wednesday’s prepared testimony by Fed Chairman Ben Bernanke to the Joint Economic Committee of Congress seemed to start with an effort to silence recent chatter about the Fed’s so-called "exit strategy", i.e. the "tapering" off of its quantitative easing program.

"A premature tightening of monetary policy could lead interest rates to rise temporarily, but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further". Obviously. Pretty much an undeniable truism.

But then, in response to a question from the Committee, he stunned the markets with what seemed like a complete volte face, when he commented that the Fed could cut the pace of asset purchases,"in the next few meetings", sending 10 –Yr US Treasury yields through the 2 per cent barrier for the first time since they fell through the floor on 15th March on news of the first, ill-conceived version of the Cypriot bail-in.

Then, later that evening, the minutes of the most recent meeting of the Federal Reserve’s monetary policy committee, the FOMC, informed us that, "…. a number of participants favored tapering, (of Quantitative Easing), as early as June if incoming information suggested sufficiently strong and sustained growth at the time", although "views differed on the likelihood of that outcome".

It’s certainly the case then that the FOMC as a body has tilted towards removal of the "punch bowl’", as evidence that the "party" is hotting up becomes more widespread. Sure,  the big-guns, Bernanke, New York Fed President Dudley and Vice-Chairperson Yellen are inveterate doves, but there is a vociferous contingent of more-hawkish voters, (and non-voters), and when the Committee undergoes its annual rotation of regional Fed President voters next January, the balance will become distinctly more "hair-shirt"; if you assign a rating to each voter using a scale with 0 for dovish, to 5 for hawkish, and aggregate the changes, then I’d say it’s 10 "out"and 16 "in". Markets will begin to discount this soon.

This may all seem pretty arcane stuff and you may think that unless you’re a bond trader you needn’t really pay too much attention to such detail. ABSOLUTELY NOT; if you have investments of any sort in stocks, bonds, (of course), or commodities, then you should be acutely interested, as there is nothing which has contributed to rallies since March 2009 so much as the Federal Reserve’s largesse.

So what is the Fed up to? My view would be that they know QE has played a highly significant role in powering markets higher, they fear bubbles, they fear the reaction when they start to tighten, but they know it’s much like a visit to the dentist-the longer you put it off, the more painful the consequences.

Above all perhaps, they fear a repeat of 1994, when unexpected tightening caused a bond market rout.

So they’re trying to let us know as subtly as possible that they’re thinking about making a dentist’s appointment, and that means the rallies probably only have a month or two to run.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Is it really hypocritical for lefties to send their kids to grammar schools?

Both sides now.

The year is 2030. Half the developing world is under water. The US passes a constitutional amendment allowing President Ivanka Trump to stand for a third term. The Labour right is increasingly confident that, this year, it might finally remove Jeremy Corbyn.

You, however, don't care about any of this because your mind is on other things. Your eldest is turning 11, and Theresa May's flagship education policy has been a success - there is now a grammar school in every town, as well as rather a lot of secondary moderns. And so, you need to decide what matters to you more: your egalitarian left-wing principles or your determination to get the best possible education for your kid.

Let's get one thing straight before we get too far into this - bringing back grammar schools would be a terrible education policy. There's no evidence for the contention that they create social mobility – they tend, in fact, to be dominated by the most prosperous families, who have the sharpest elbows and find it easiest to fund tutoring for their kids. What's more, while the kids who attend grammar schools tend to do pretty well, the majority who don't do worse than you'd otherwise expect.

As a result, overall education standards are higher in comprehensive areas than they are in selective ones. (The BBC's Chris Cook has written several excellent pieces on this topic; here’s one of them.) One of the few things that can unite both everyone in education policy, and everyone in the Labour party, is that grammar schools are terrible.

Neither of those groups are in charge of the country right now, however, and Prime Minister May – not a woman who's lacking in intellectual self-confidence at the best of times – seems particularly committed on this one, so grammar schools we shall have. For middle-class lefties, then, the question seems very likely to become: is it hypocritical to send your kids to one?

There are, it will stun you to learn, two schools of thought on this.

One denies that it's even a question: of course it's hypocritical. Selective schooling will do untold damage to education standards, the economy and social fabric, not to mention the self-esteem of the vast majority of kids who get told they're a failure at the tender age of 11. How can you possibly claim to care about disadvantaged kids, even as you expend time and money that other parents don't have on coaching your kids so that they don't have to go to school anywhere near them?

The other school of thought is more nuanced, and – one can't help but noticing – more likely to be expressed by those whose age is closer to 30 than to 18.

Selective education is a bad system, it concedes – but it is not a system that will go away just because I, personally, refuse to take part in it.

Obviously I'd prefer to send little Timmy to a comprehensive school. But in the selective world of 2030 there won't be comprehensive schools, merely grammars and secondary moderns. Someone's kid is going to get that place in a grammar school. By not pushing for it myself, all that I'm doing is disadvantaging my own child, without actually making the world better.

The first lot, in other words, think it's immoral to buy your place in a lifeboat while the kids in steerage drown. But the way the second group sees it, prioritising abstract principles over the life chances of your child is immoral. (You could call it the Jeremy Corbyn vs Claudia Bracchita argument). And so, whenever this topic has reared its head, people tend to end up shouting at each other, if not filing for divorce.

At risk of looking all wussy and liberal, I genuinely can't work out where I stand on this one. On the one hand, there's something quite persuasive in the argument that one can fight against grammar schools, but still send your kids to one - there's nothing inconsistent about wanting to change a bad system, but still trying to make the best of it. (I'm still imagining a 2030 selective education dystopia, of course: arguing against grammar schools, then deliberately moving to Kent so your kids can attend one, is rather harder to defend.)

One the other hand, there is something inherently uncomfortable in left-wingers finding theoretical justifications for their own selfishness ("Of course, taxes should be higher. But since these loopholes are there, well..."). I also, by the by, went to private school (sorry), and suspect that the 7 per cent of the population which did the same sticks its oar into the state education system far too much already, so maybe I should shut up.

Before I do though, here's one last cynical thought. At the moment, Labour is united on grammar schools - they are obviously bad, we obviously shouldn't create any more of them. If selective education were to become national policy again, however, that unity could plausibly crumble. And one of the few issues that can unite the entire Labour movement simply wouldn't be there any more.

I'm not saying this is the motive behind Theresa May's obsession with grammar schools, but it would be a helpful side effect.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.