The Chairwoman Who Cried Wolf

BoycriedwolfbarlowThe following was written in the context of what happens if that rate rise takes longer — MUCH longer — to materialize than expected? The logical conclusion in that instance would be that emerging markets have been oversold. The segment below was taken from frontura newsletter I occasionally receive. You can find out more about the group at frontura.vc.

Reposted from Frontera
By Kevin Virgil

The Chairwoman Who Cried Wolf

You are undoubtedly familiar with the story of ‘The Boy Who Cried Wolf’. The tale is one of Aesop’s Fables, a group of children’s stories believed to date as far back as ancient Greece and first published in the 15th century. The legend is that of a shepherd’s boy who repeatedly tricks his townsfolk into thinking that a wolf is attacking his flock of sheep. The foolish boy continues to play the trick until the townsfolk, tired of his antics, ignore him. Of course, it’s at that point that a wolf actually appears and treats itself to a lamb smorgasbord, and the boy’s cries are to no avail.

Like many of wise old Aesop’s stories, this one bears an uncanny similarity to contemporary events. Take, for instance, Fed Chairwoman Janet Yellen’s repeated assertions that the Fed is likely to raise rates this year (as she stated in March, July and September). Her central claim is that inflation pressures are gradually going to rise, and thus action must be taken now.

However the point of the story is that many people think she won’t raise rates and that could go on until after the U.S. Presidential elections. It remains to be seen….

 

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