Don't Expect A Central Bank Bailout This Time, ECB's Nowotny Warns

To all those hoping for a sign or signal from central bankers that the recent correction in US stocks was necessary and sufficient for intervention, here are some disappointing examples of what they have said recently:

"If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?" asked outgoing Fed Chair Yellen during her exit interview, selling the all-time highs. "The financial system is much better capitalized. The banking system is more resilient," the former US central banker added, listing her accomplishments. "I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system."

That was that moment when the "Yellen Put" instantly vanished, and stocks - predictably - plunged, while the industry’s most obviously ill-conceived financial innovations – inverse VIX ETFs - collapsed to essentially zero in the space of thirty minutes on the first day of new Fed chair's Jay Powell tenure.

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"I think it’s basically a market event, and these things can be healthy," stated Dallas Fed president Robert Kaplan, diagnosing Monday’s -4.1% S&P 500 epileptic fit. "I don’t think it will have economic implications. 2018 will be a strong year in America. We’re at or near full employment. I continue to expect three rate hikes this year," explained the former Goldman banker.

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"This is the most predicted selloff of all time because the markets have been up so much and they have had so many days in a row without meaningful down days,” said Philly Fed president Bullard. "Something that has gone up 40% like the S&P tech sector would at some point have a selloff." he added philosophically.

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NY Fed’s Dudley chimed in at the end of the week: "An equity rout like the one that occurred in recent days has virtually no consequence for the economic outlook."

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Then on Sunday, Austrian central bank Governor and ECB member, Ewald Nowotny - in the most direct warning to liquidity addicts and market bulls yet - said "the recent drop in equities is a normalization, a reasonable wake-up signal to show that stock markets can’t just keep rising all the time,” speaking on Austrian television.

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