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The ECB Blasts Governmental Fear-Based Racketeering, Questions Keynesianism, Believes The Fed's Powers Are Overestimated

In what could one day be seen by historians as a seminal speech presented before the Paul Volcker-chaired Group of Thirty's 63rd Plenary Session in Rabat, the ECB's Lorenzo Bini Smaghi had two messages: a prosaic, and very much expected one: of unity and cohesion, if at least in perception if not in deed, as well as an extremely unexpected one, in which the first notable discords at the very peak of the power echelons, are finally starting to leak into the public domain. It is in the latter part that Bini Smaghi takes on a very aggressive stance against not only the so-called "inflation tax", or the purported ability of central bankers to inflate their way out of any problem, but also slams the recently prevalent phenomenon of fear-mongering by the banking and political elite, which has become the goto strategy over the past two years whenever the banking class has needed to pass a policy over popular discontent. The ECB member takes a direct stab at the Fed's perceived monetary policy laxity and US fiscal imprudence, and implicitly observes that while the market is focusing on Europe due to its monetary policy inflexibility, it should be far more obsessed with the US. Bini Smaghi also fires a warning shot that ongoing divergence between the ECB and Germany will not be tolerated. Most notably, a member of a central bank makes it very clear that he is no longer a devout believer in that fundamental, and false, central banking religion - Keynesianism.

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Following Up On The Japan Disaster Scenario; Or Can Still We Learn From The Failure Of Keynesianism?

"A few months ago I wrote about an impending government funding crisis in Japan. The pushback was so interesting I thought it worth writing up. None of you really disputed the long-term problems facing Japan but, for various reasons – which I’ll look at below – very few of you thought it was worth worrying about just now. Meanwhile, the biggest JGB holder on the planet – the Government Pension Investment Fund (GPIF) – which has already admitted it’s no longer able to roll maturing bonds, has announced that it will open credit lines so it doesn’t have to sell them to fund its obligations. With ¥213 trillion of JGBs to roll this year, or around 45% of GDP (see chart below), maybe I’m not the only one scared stiff after all!" Dylan Grice, SocGen

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Record US Debt Vs. Keynesianism: A Bloomberg Presentation

Bloomberg has released another terrific interactive presentation on the ongoing duel between Keynesian economics and record debt levels (both in the US and in most developed countries). While certainly nothing new to regulars, it does provide a glimpse into the final chapters of the debate between record deficit-fans and what is be ultimate natural trade off - upcoming sovereign defaults on a global scale.

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