A Celtic temperament

We are doing a quick tour of England and Ireland, catching up on business.

No time to write this morning, we needed to rush to a plane.

The weather, generally, is terrible: cold, windy, rainy… It is mid-August, but it could pass for mid-winter in most places.

Here in Ireland, the sun barely shines. Not that this dampens our spirits or decreases our joy. Those were long gone before we boarded our plane in Limoges.

Yes, dear reader, we have a Celtic temperament. We have periods of happiness and contentment, but we count on our deep sense of cynicism and gloom to get us through them.

This makes us well suited to our job. We are forward lookouts, scouts on the financial frontier. We are meant to keep alert at all times and to expect an attack at any moment.

Often, we mistake a skirmish for a major battle, and often, we think we see a major assault, and it turns out to be only a raid.

But you never know.

For the last five years, forces led by Ben Bernanke and then Janet Yellen have been masters of the field, sweeping away all Mr Market was able to throw against them. But how long can that go on, we wonder?

Yellen, Draghi, and that clever Mr Abe in Japan, have shot off more ammunition in the last five years than in all the financial wars in all of history.

How much firepower have they got left?

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More important, how much real progress have they made? They’ve hotted up the markets for debt and equity. So great is their apparent success that investors sleep soundly in their beds, confident that no harm will come them.

The enemy has been routed, they believe. Stocks are near record highs. Bonds too. Even Italy – Italy! – is able to borrow at less than 3%, even while it stiffs creditors. Reuters:

Italian minister delays goal of repaying commercial debts

ROME – Italy will settle the debt arrears it owes to private sector suppliers by the end of this year, Economy Minister Pier Carlo Padoan said in a newspaper interview on Sunday, pushing back previous commitments.

The Italian state owes some 75 billion euros ($102 billion) to private suppliers, according to the most recent data from the Bank of Italy. The unpaid bills have starved companies of cash and triggered layoffs, factory closures and bankruptcies.

“We will ensure that the arrears are paid off by the end of the year,” Padoan told Corriere della Sera daily.

Prime Minister Matteo Renzi promised in March to pay back all the debt arrears by July. Within a week he put back the target date to September.

Meanwhile, signs of real victory are few. In the housing market, for example, where ‘mission accomplished’ was announced last year, prices may be falling again.

Mortgage originations fell 59% last quarter. Prices in most areas are soft or falling.

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