Schlemiel, schimazel

American readers of a certain vintage will no doubt recall a television sitcom called Laverne and Shirley, a spin-off from Happy Days in the 70's and early 80's about a couple of

hair-brained young women living in Milwaukee (and. later, Southern California.)   In the opening credits we learn that our two heroines are employed in the brewing of Schotz Beer, though they exhibit somewhat less than total commitment to their craft.  Real ale or a Brooklyn brewpub it wasn't.

Still, one can imagine the sort of consumer to whom Shotz may have appealed.  Someone who wasn't looking to take many risks in his beer consumption, and in return was content to be satisfied with the meager pleasure that Shotz would afford him.   Heaven forbid that he take a risk and end up with something truly appalling like Olympia or Schaefer.  (UK readers, imagine that this tastes like one part Tesco own-brand beer mixed with two parts of week-old dishwater, and you get the idea.)

Alas, consumers of latter-day Schatz have no such certainty.   To be sure, purchasers of the German short end have in many cases been motivated by the same ideals as Laverne and Shirley's customers: safety and the willingness to pay for it by accepting substandard returns in exchange.  However, when you step through the looking-glass of negative bond yields, can you ever be truly safe?    In any event, the front end of Europe is starting to look almost as ropy as one of those original Shotz beers would taste today.

Yesterday's weakness was particularly interesting given another "sources" story suggesting that an ECB QE extension beyond March is more or less nailed on, along with changes to the capital key, issue limits, and yield floor eligibility.  Of course, Draghi told us just the other week that purveyors of rumours and leaks know nothing, though it is funny how often these "know-nothings" have predicted ECB policy developments over the years.   Why, it's almost as if they have a seat inside the governing council or something!

In the UK, meanwhile, the Old Lady has come in for rather a lot of stick recently.   If it's not the Government criticizing QE and ultra low rates, it's the Serious Fraud Office hauling in Paul Tucker to determine just how far he may have thrown a few LIBOR traders under a Routemaster.  If only we had a recording of the infamous phone call to Bob Diamond....Either way, short sterling is now pricing in some tightening by the end of next year, and doesn't look particularly incline to stop here.

Regular readers will know that your author doesn't particularly rate Mark Carney and is generally happy to see him squirm.   That being said, some of the barbs thrown about by politicians are reminiscent of Macro Man criticizing doggerel poetry in Mandarin.   It might not be very good, but he really isn't competent to be having a moan!

Finally, Macro Man found this data on the BIS website and thought it was interesting given the current central banking revulsion against negative inflation rates.   It's worth remembering that negative inflation is hardly a new phenomenon, and indeed was the norm for large swathes of economic history.   The UK CPI index, for example, was at the same level in 1915 that it was in 1830, and Britain didn't exactly suffer economically for much of that period.   (They did, however, trade extensively with China, albeit in a morally repulsive fashion.)

Truly, there is nothing new under the sun, as much as our central banking overlords might wish it to be so...