In response to an FT Blog by Gavyn Davies on 1st May 2015, entitled 'Fading risks of global recession'
“Since mid-February, the financial markets have become much less concerned about a hard landing in global economic activity, or at least about a potential clash between slowing economic activity and inappropriately tight macroeconomic policy from China and the US Federal Reserve”
Why might that be?:
China has borrowed an extra trillion this year in order the keep their credit bubbles from popping; meanwhile the Fed has kept its rates at circa 0.35%. This has helped China avoid the temptation to devalue the Yuan any further...thus happily avoiding a repeat of the contagion on the NYSE the last two times it did so - the effects of which included the inevitable dispatch of data dependent FOMC members to microphones readily manned by PR agents posing as journalists...in order to row back the comments they'd made the previous week.
Meanwhile, in order to give the Chinese that extra bit of 'ease', the BoJ 'took one for the team' by not increasing QE, or disappearing any further down the NIRP rabbit hole, trashing the Nikkei and boosting the Yen in the process - exactly the opposite of what it wants.
The result is that China gets the easing it needs by proxy of the tightening in Japan, allowing it to float gently down a little bit with the dollar. The good news for Dr. Yellen is that she had yet another excuse NOT to tighten, something that would be quite risky for her pal Hillary Clinton - the only candidate who would dream of re-appointing a fully paid up member of the Print Union, and obedient servant of the status quo. The pressure is now off Dr Yellen until June, so they can happily talk about tightening again, at least until its time to start worrying about Brexit.
In short, I suggest the reason financial markets have become 'much less concerned about a hard landing' is because the data dependent, totally independent central banks of the world, coincidentally, and as if by magic, transferred the pressure temporarily from China to Japan keeping the global Ponzi scheme going a while longer.
Disclaimer - this is what some people might call a ‘conspiracy theory’; though the idea that central bankers working together in secret, and then lying through their teeth about it, should be considered ‘theoretical’ is quite possibly a much crazier idea…one that could easily be cured by reading some of the minutes from the Greenspan years, or indeed by listening to recent comments from the maestro himself.