Monetary Policy

The World Is Red

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

The Silver Age Of The Central Banker (Ends Badly)

The Golden Age, per the original Greek myth, was an era of unblemished cooperation and great deeds. The Silver Age, on the other hand, was a pretty miserable time to be alive. Not as warlike as the Bronze Age, and not the war of all against all as in the Iron Age, but the spirit of the age was one of strife and competition. It ends badly. What’s required is seeing the world for what it is, not what we might wish it to be. That’s not easy, whether you’re a central banker or a small investor, but it’s never been more important.

The Chilling Ways The Current Global Economy Echoes The 1930s Depression Era

The imbalances that low rates and elasticity produce may “return us to the modern-day equivalent of the divisive competitive devaluations of the interwar years; and, ultimately, [trigger] an epoch-defining seismic rupture in policy regimes, back to an era of trade and financial protectionism and, possibly, stagnation combined with inflation.”

Stephen Roach: "Central Banking Has Lost Its Way, Is In Crisis"

In what could well be a final act of desperation, central banks are abdicating effective control of the economies they have been entrusted to manage. First came zero interest rates, then quantitative easing, and now negative interest rates – one futile attempt begetting another. Just as the first two gambits failed to gain meaningful economic traction in chronically weak recoveries, the shift to negative rates will only compound the risks of financial instability and set the stage for the next crisis.

Japan Goes Full Goebbels: Government Cracks Down On Media Over Negative Economic Reporting

Shinzo Abe promised the Japanese people a glorious economic recovery, but the economy sucks. Nevertheless, Shinzo Abe wants to stay in power as long as possible and the best way for him to achieve this is to call for snap elections this summer. This presents quite the dilemma. How does Abe prevent his popularity from slipping further in order to give himself a chance of winning early elections? It seems he found his answer. Crackdown on the media by ensuring anyone who dares criticize him or him idiotic, failed polices is fired.

Frontrunning: February 19

  • Stocks knocked back as oil rally falters (Reuters)
  • Still no deal for Britain on EU reforms after all-night talks (Reuters)
  • Oil Falls Near $30 as Rising U.S. Crude Stockpiles Expand Glut (BBG)
  • PBOC to Raise Reserve Ratios for Banks That Don't Meet Criteria (BBG)
  • China’s Top Securities Regulator to Step Down (WSJ)

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying

No society wants to admit economic failure or economic sabotage, and this is why the con-game is able to continue in the face of so much concrete truth. Ultimately, the market trends and economic trends will flow into the negative. In the meantime, expect massive market rallies, rallies which will then disintegrate in a matter of days. And, whatever happens, never take what mainstream economists say very seriously. They have failed the public for long enough.

When Paper Money Becomes Trash

It costs 1.7 cents to make a penny and 8 cents to make a nickel. The U.S. government loses tens of millions of dollars every year putting these coins into circulation. So, why is it wasting money and time making coins almost no one uses? Because phasing out the penny and nickel would mean acknowledging currency debasement. And governments never like to do that. It would reveal their incompetence and theft from savers.

Forget "The Great Moderation", This Is "The Great Intellectual Failure"

History might look back on this period as a great intellectual failure for not properly understanding the dynamics. The Fed should spend more of its intellectual power trying to understand why its policy actions have not had the desired or expected result. Market pundits arguing for easier money (or negative rates) do not fully understand the long-run unintended consequences to markets and economies from extreme and long periods of unconventional monetary policy. Market turbulence today is a warning sign.

NIRP Won't Work - What Ray Dalio Thinks Central Banks Will Do Next

While negative interest rates will make cash a bit less attractive (but not much), it won’t drive investors/savers to buy the sort of assets that will finance spending. And while QE will push asset prices somewhat higher, investors/savers will still want to save, lenders will still be cautious lenders, and cautious borrowers will remain cautious, so we will still have “pushing on a string.” As a result, Monetary Policy 3 will have to be directed at spenders more than at investors/savers.

The Four Horsemen Of Economic Apocalypse Are Here

"...the economic patient is riddled with cancer - central banks are applying a defibrillator, but there's only so much electricity the patient can take before it becomes a burnt-out corpse."