Stocks Flat As Lagarde Offers Inflation Policy Change in Europe

For the second consecutive day, stocks posted mediocre results, most likely a pause in the overall giant run they've been on since late September of 2019, and hardly anything over which to be concerned.

The manners in which these last two trading sessions found the same end were radically different, a chartists' dilemma in which Wednesday started on the upside before relenting late in the day and Thursday found stocks mired deep in the red, finding salvation in the afternoon.

Essentially, the indices produced an elongated "V" pattern, stretching over two sessions.

Being that the market is run by algorithms and influenced heavily by macro momentum, this recent spate of weakness is probably going to be downplayed by the uber-bulls and supported by dovish tones from the Federal Reserve along with more sloshing capital from their burgeoning balance sheet.

The Fed's FOMC convenes on Tuesday and Wednesday of next week, but the market seems uninterested in whatever they might announce, being that they will almost surely keep interest rates precisely at the present level, the federal funds rate in a sweet spot between 1.50 and 1.75 percent, good enough to attract investors to bonds and other fixed income products and not onerous enough to preclude lending to all but the least worthy.

In Europe, newly-installed ECB head, Christine Lagarde quipped about inflation, launching a review of the bank's policies and hinting that the long-standing target of two percent might be few tenths too high under the current environment of negative interest rates and slowing national economies.

Inflation in the Eurozone has been nearly non-existent since the turn of the century, last year checking in at a subdued 1.3 percent. The call for a policy review by Lagarde is a timorous one, since practically anyone with a rudimentary understanding of economics realizes that the "Japanization" of Europe is well underway and that lowering the target for inflation to 1.6 or 1.5% is just more posturing by the central bank which has no control over the forces of mass immigration, low birth rates, and over-juiced financial markets.

Perhaps Ms. Largarde is on to something, however. Could she actually be headed for an Austrian awakening in which an epiphany guides her to understanding that any inflation is unnatural in a world of sound money?

Next thing you know, she'll be calling for a new currency to replace the flawed fiat euro, one backed by gold and silver.

Surely there would be many who scoff at the idea, but, when even negative interest rates fail to produce positive results, isn't it time to stop examining policy and start critiquing the currency itself.

Partially-backed gold and silver backed money - be it digital, paper, or coinage - may not seem such a bad idea, especially to people drowning in debt.

Central bankers have engaged in lunacy for the better part of 50 years (since Nixon's closing of the gold window in 1971). Maybe it's time for sound thinking and sound money.

At the Close, Thursday, January 23, 2020:
Dow Jones Industrial Average: 29,160.09, -26.18 (-0.09%)
NASDAQ: 9,402.48, +18.71 (+0.20%)
S&P 500: 3,325.54, +3.79 (+0.11%)
NYSE: 14,102.04, -8.20 (-0.06%)