The Fed has a difficult task ahead

Careless talk costs money.

One clings to the hope that Chairman Ben Bernanke and his colleagues at the US Federal Reserve are some of the brightest economists in the world today and hence they know what they are doing because, be in no doubt, they have embarked on an ambitious journey, during which they intend to simultaneously burst bubbles, avoid a bond market rout, and maybe even at the same time encourage banks to use their cash to lend to people and businesses by making government bonds less attractive.

To achieve all of the above at the same time without causing excessive market volatility will indeed be an enormously difficult task. As Andrew Haldane, the Bank of England’s Executive Director for Financial Stability, recently observed rather pointedly, "we have intentionally blown the biggest government bond bubble in history".

Surely recent "Fedspeak", including Bernanke’s bombshell comment that Quantitative Easing, (QE), may be tapered "within the next few meetings" can’t just have been "careless talk". Given the quite extreme effect on US Treasury bond yields, (the 10-year yield climbed by 0.60 per cent in only five weeks), one can be quite certain that by now the Fed would have embarked on a coordinated program intended to correct market perceptions, if the Fed was unhappy with same. This has not happened, but there is just a chance that they take the opportunity next Wednesday at the regular meeting of their monetary policy committee, the FOMC, to do just this. However, I don’t expect this to be the case.

I feel that a large contingent at the Fed has become concerned that bubbles of the kind that brought the financial system to the brink of collapse in 2008 were re-forming and they needed to tackle this sooner rather than later.

The multiple and diverse incidental consequences of their change in rhetoric are plain to see. Credit spreads have widened, emerging markets and currencies have tumbled, and fear rather than greed has the upper hand. Most frustratingly for the Fed’s counterparts at the Bank of Japan, the Yen has strengthened, as its safe-haven status has trumped even their massive quantitative easing and this in turn has caused the Nikkei stock index to collapse.

I’m sure the Fed is watching these developments very closely, but I don’t believe they will be easily deviated from their path, as they fear delay will have far more serious consequences.

Ben Bernanke. 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.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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