Christine LaGarde recently referred to Jerome Powell as the bravest Central banker in the world.
I expect for not wielding his power.
In these moments, I remember Alan Greenspan.
In December 1996 two words changed my life.
Alan Greenspan, then Chairman of the Federal Reserve said “…irrational exuberance…”to describe the rally in dollar-based asset prices we all had witnessed after Clinton’s re-election.
I was trading Southeast Asian currencies and Australian Dollar versus Japanese Yen arbitrage for Commonwealth Bank of Australia. My boss on the desk was at the gym and I was waiting for him because the next day required some planning. Plus working for an Australian bank in NYC meant staying ‘late’ every night to hand off the book (positions and risks).
Essentially the most powerful man in the world (as Clinton refers to Greenspan in the Season 2 Documentary Special) said those 2 words and everything changed.
Weeks later the reverberations reached their peak as Australian and US interest rates were the same, or at par, meaning financing was, to say the least askew. Madness.
Greenspan’s words, from my perspective, also start the Asian Flu that we experienced in the summer of 1997.
His words were the first domino. A global sell off led to ‘flights to quality’ for investors so in February when the Thai Bhat and the Thai Stock market started to fall they were the 4th and5th dominoes. Aforementioned AUD/USD madness in both spot and forward foreign exchange markets were the 2nd.
And it was all Greenspan?
Yes. It was the power of the Chairman of the Federal Reserve sharing his view of the global markets in an after dinner speech that shifted markets by trillions.
That is power.