Forex Flash: BoJ may soon drive other central banks into action – Deutsche Bank

FXstreet.com (Barcelona) - According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The BoJ is the latest runner with this demand baton which may in turn actually force others into action (possibly the ECB in the future), or encourage others to carry on QE for longer (the Fed) thus reinforcing this artificial demand for fixed income.”

While such technicals remain in place its hard for defaults to rise significantly in the foreseeable future even with what is weak growth, average fundamentals, credit deterioration and a rise in more risky deals. However is it healthy that the default/insolvency cycle is being sedated in so many large economies?

Surely the financial system and life in general has prospered through history on the basis of creative destruction. Indeed all the good looking and intelligent readers of this note are products of survival of the fittest. Economic growth over time is helped by a regular cleansing. Clearly there are other factors at work here but we think that what's great for credit investors isn't necessarily good for the global economy. “A bit of a paradox. We would stress that we fully understand why the authorities wouldn't want free markets to operate today as the risk of a huge global default and unemployment cycle would still be very high. However their intervention has a cost in our opinion.” they add.