In our second Virtual Interactive Session this week, Societe Generale sparked member interest in the state of fiscal and monetary policy in the wake of Covid-19 and how this will play out for rates and FX management.
Albert Edwards, global strategist at Societe Generale, kicked things off with his not-the-House-view remarks on the Japanification of the US and its implications for deflation (he sees a rising risk of it for now) and the dollar (declining).
- Unprecedented Fed intervention directly into the real economy and not just the finance sector backed by unprecedented levels of fiscal stimulus has taken away the positive US rate differential and put us on par with Europe and Japan–with an economy supported by wholly government.
- “We have crossed the Rubicon” he says, now from QE to something more like MMT, and we already could not go back from QE after the GFC. Now there is “no way we can go back” from monetizing everything away.
Look to NeuGroup Insights for what his colleagues told members they should do to hedge the dollar going forward, unwind euro debt issues and swaps and how to position their floating-rate exposure for Mr. Edwards’ updated “Ice Age thesis.”
Societe Generale is sponsoring NeuGroup’s FX Managers’ Peer Group 2 in September. Today’s VIS was just a precursor.