Morgan Stanley: Central Banks Are Playing a Game of Chess That Results in an Endless Cycle of Easing

03-Sep (Bloomberg) — After the European Central Bank decided to initiate an asset purchasing program, President Mario Draghi reportedly elected to unwind with a game of chess on his iPad during the plane ride back to Rome.

According to Morgan Stanley’s Marco Spaltro and Jim Caron, Draghi’s choice for a game could not have been more fitting. In a new commentary, the two portfolio managers argue that diverging monetary policies and persistently low levels of inflation mean that central banks are now engaged in a global game of chess.

Moreover, they say, this particular match won’t end in a stalemate. Despite concerns that central banks have no moves left, the pair contends that all roads lead to competitive currency devaluations.

…The punishment for trying to leave the game or refusing to play, according to the portfolio managers, is deflation.

[source]

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