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Central Banks Have Realized Their Worst Nightmares Are Approaching

Phoenix Capital Research's picture




 

 

 

 

Central Bankers will never openly admit that they or their policies have failed. Moreover, they do not rush into sudden tightening (more on this in a moment). But one can begin to notice subtle changes in their language and actions that indicate they have noticed what’s happening in Japan (the failure of the BoJ’s “shock and awe” QE program to generate growth).

 

Nowhere is this more clear than at the US’s Federal Reserve or Fed. Indeed, starting in August 2013, various Fed officials began questioning the efficacy of QE.

 

First came the San Francisco Fed with a study revealing that QE generally doesn’t appear to generate economic growth:

 

Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation. Research suggests that the key reason these effects are limited is that bond market segmentation is small.

 

Moreover, the magnitude of LSAP effects depends greatly on expectations for interest rate policy, but those effects are weaker and more uncertain than conventional interest rate policy. This suggests that communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases.

 

http://www.frbsf.org/economic-research/publications/economic-letter/2013/august/large-scale-asset-purchase-stimulus-interest-rate/

 

A few months later, the former Fed official in charge of the Fed’s first round of QE, penned a Wall Street Journal article stating that QE was in fact a Wall Street bailout.

 

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time…

 

It wasn't long before my old doubts resurfaced. Despite the Fed's rhetoric, my program [QE] wasn't helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn't getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.

 

http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884

 

Around this time, the Fed began to taper QE first by $10 billion in December… and another $10 billion in January. By this point even uber-dove Fed President Bill Dudley (he formerly claimed inflation is low because iPads are getting cheaper) even admitted the following:

 

We don't understand fully how large-scale asset purchase programs work to ease financial market conditions—is it the effect of the purchases on the portfolios of private investors, or alternatively is the major channel one of signaling?

 

http://www.ny.frb.org/newsevents/speeches/2014/dud140104.html

 

At this point, Ben Bernanke handed off the reins for Fed Chairman to Janet Yellen. Yellen has since continued Bernanke’s tapering projects, reducing the monthly QE spend from $65 billion to $55 billion.

 

The failure of the Bank of Japan’s massive QE program and the Fed’s decision to taper are not unrelated. Take a look at the timeline.

 

·      April 2013: Japan announces a “shock and awe” QE program.

·      August 2013: San Francisco Fed economists (where future Chairman of the Fed Janet Yellen is President) write a study showing QE is ineffective at generating economic growth.

·      November 2013: Former Fed officials admit QE was not meant to help Main Street.

·      December 2013: the Fed begins to taper its QE programs by $10 billion

·      January 2014: Bernanke’s last FOMC as Fed Chairman, Fed announces another $10 billion taper

·      March 2014: Janet Yellen takes over at the Fed and announces another $10 billion QE taper.

 

This represents a tectonic shift in the financial markets. It does not mean that Central Banks will never engage in QE again. But it does show that they are increasingly aware that QE is no longer the “be all, end all” for monetary policy.

Investors take note. One of the primary market props of the last five years is being removed. What happens when the markets finally catch on?

This concludes this article, swing by www.gainspainscapital.com for a FREE investment reports Protect Your Portfolio, which outlines how to protect your portfolio from bear market collapses.

 

Best Regards

 

Phoenix Capital Research

 

 

 

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Sun, 04/27/2014 - 23:28 | 4702869 mvm457
mvm457's picture

THIS says all you need to know. Went to cash months ago...

"...Former Fed official in charge of the Fed’s first round of QE, penned a Wall Street Journal article stating that QE was in fact a Wall Street bailout.

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time…

It wasn't long before my old doubts resurfaced. Despite the Fed's rhetoric, my program [QE] wasn't helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn't getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash..."

http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884

Thu, 04/24/2014 - 06:49 | 4689678 Comte d'herblay
Comte d'herblay's picture

riiiiigthhtt.....that 'splains the  NASDAQ swing of 90 points to the upside in half a minute, near the bell with options expiry tomorrow.

 

Thu, 04/24/2014 - 03:05 | 4689458 JailBanksters
JailBanksters's picture

Maybe ol Yeller realizes she might have to get a real job later this year, flippin burgers.

Wed, 04/23/2014 - 23:59 | 4689254 Arthur Schopenhauer
Arthur Schopenhauer's picture

Half of America is talking about killin' you with piano wire!
Oh... I'd be worried if I thought anybody in America could afford piano wire!
If they got enough money to buy piano wire they got enough money to pay me my muthafuckin' bonuses!

Shimmy Sham the AIG Executive Talks...

https://www.youtube.com/watch?v=owy0-3CJkVI

Wed, 04/23/2014 - 22:05 | 4688974 steelrules
steelrules's picture

Next central bank trick to save their system "Bail in's" all your money are belong to us. 

Thu, 04/24/2014 - 03:13 | 4689465 JailBanksters
JailBanksters's picture

People don't realize but.....

When you deposit money into a Bank, the money really does belong to them to do what ever they want to. You only have a claim ticket on that money, and it's up to them to honour that claim ticket or not. Which is why the Banks invented the FDIC that only has enough funds to bail out the smallest bank, to inspire confifence in the Banking system against failure.

 

Thu, 04/24/2014 - 07:02 | 4689699 madtechnician
madtechnician's picture

Actually when you deposit paper cash money in a bank , the debt liability of that money is transferred from the Central Bank to the bank you are depositing it into , if it's done by a cheque or transfer then the debt liability passes from the issuing bank to the receiveing bank. All of our money is a matrix of debt's which is constatly being transferred around. And when the music finally stops , no bank or central bank is liable for anything whatsoever to you or anybody. You may get lucky and they use tax payers debt to bail them out so you get something back , or maybe they will steal somebody elses debt and pass that onto you with a bail-in. But at the end of the day all of our money is somebody's debt. All that is happening is these debts are being passed around and they are getting larger and larger every single day. At some point it will all go POP.

Thu, 04/24/2014 - 06:24 | 4689623 Jumbotron
Jumbotron's picture

Logged in at 6:22 am just to give you your first up vote.  All kind of truth up in that statement.

Wed, 04/23/2014 - 21:19 | 4688827 MFL8240
MFL8240's picture

It does not mean that Central Banks will never engage in QE again. 

 

NO, in the future they will do bond buying through Belgium (LOL) and lie about the tapering to the American people while injecting money in foreign banks to buy the junk!!

Wed, 04/23/2014 - 20:09 | 4688588 Ban KKiller
Ban KKiller's picture

The fascist state is advancing nicely, thank you. 

Your vote is meaningless. 

Wed, 04/23/2014 - 19:08 | 4688398 babarian gourd
babarian gourd's picture

will someone, anyone, please tell me when the final shoe, THE shoe, will drop?  Im sick of waiting and hoping and prepping and bitching and wondering.  I wish to seek retribution by the 1,000s but cannot do so while the status quo remains.  "is anybody out thereeee?  just nod if you can hear me..."

Thu, 04/24/2014 - 06:32 | 4689642 Jumbotron
Jumbotron's picture

I'll give it a shot.  We are already heading into....if not now already in....another recession.  That will be globally evident by the end of the year.....defintely 2015.  Taper will end.  Maybe not go back up to 85 billion a month.....but The Fed will have to stop to quiet the whiny ass bitch boys on Wall Street.

However......come 2020, give or take a year, that's when things degrade in an increasingly rapid rate going forward.  Starting around that time give or take you will have the confluence of Peak Cheap Energy being a gloablally recognized meme simply because of the permanent spike in oil prices.  Think $5 dollar gallon gas average nationwide for Regular unleaded.  Coupled that with Peak Ponzi....Peak Government Debt....The Baby Boomer Retiree Tsunami cresting through the 2020's......but with less than half their retirement money and pensions left....if that much......Peak Drought plus Peak Cheap Energy spiking food prices.....Peak Sofware Effeciency and Robotics for Peak Human Labor thus driving wages lower still.

Trust me.....the shoe is being untied as we speak and slipped off the foot.  The only thing left is how high up it's going to be dropped and where.  But there are only so many step up to the top.  That can be failry easily counted.

Wed, 04/23/2014 - 20:05 | 4688572 Ban KKiller
Ban KKiller's picture

Yeah, got you on that. I think it is a slo-mo decent. The masses are still on dope, sex and tv.

Thu, 04/24/2014 - 06:41 | 4689657 Jumbotron
Jumbotron's picture

Think Huxley's "Brave New World" and Soma.

https://en.wikipedia.org/wiki/Brave_New_World

I might also suggest this......

https://en.wikipedia.org/wiki/Amusing_Ourselves_to_Death

Wed, 04/23/2014 - 18:13 | 4688259 AdvancingTime
AdvancingTime's picture

What I'm seeing develop is an "almost surreal" feeling of indifference towards reality. Companies have already ushered saving from interest paid on debt into the earning column and a major reason inflation remains low is they are sitting on a hoard of cash this has lowered the velocity of money.

We must remember the artificially low FED controlled interest rates are a massive one-off or onetime tailwind that is mainly behind us.  When rates stop going lower or reverse the positive effect will ebb and become a major headwind. With massive government debt in many countries and the economy still weak this headwind has the potential to become devastating. The collision of MMT, social unrest over inequality, and other destabilizing factors have the potential to create the perfect storm. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/01/have-we-been-lulled-into-complace...

Wed, 04/23/2014 - 17:24 | 4688044 Notsobadwlad
Notsobadwlad's picture

It was proven in the early 1800s that Keynesian economics does not work. I am sure that every Fed economist knew and knows this. This makes it certain that the actions of the Fed and its failure to accomplish it "stated" purpose were not a simple mistake, but deliberate sabotage of the economy and criminal fraud and theft at the behest of the banks.

Anyone who is stupid enough to state that a lowering in the selling price of the heavily labor arbitraged i-Pad has anything to do with inflation or deflation should have chosen another field of work, such as ditch digging (sorry for the insult to ditch diggers. I am sure they know better).

If one simply anecdotally looks at the relative importance of VALUE ADDING labor and financialization (and parasitism) in any economy, one can easily see that those economies with a large ratio of applied value adding labor are in ascention and those economies with a large amount of financialization and parasitism (such as government) are in decline. This would also imply that the market value of labor is too low and the market value of financialization & parasitism are very much too high.

The US was sold out so that the financiers, their cronies and dependents on could parasitically benefit from labor arbitrage.

Wed, 04/23/2014 - 17:02 | 4687994 BOPOH
BOPOH's picture

Big war is only solution.

Wed, 04/23/2014 - 17:19 | 4688054 Notsobadwlad
Notsobadwlad's picture

I wish someone would sometime tell me how war is a solution that cannot be accomplished by other means.

My guess is that war allows the hiding of the solution beneath the veil of war. The same solution could be applied without war, but it would be unpopular in certain sectors.

Wed, 04/23/2014 - 17:45 | 4688167 NotApplicable
NotApplicable's picture

War is the world's biggest scapegoat, and the sheeple will accept any lies as they do not want to be branded as not being patriotic.

In other words, it's a giant reset button that allows the elite to get away with murder. Literally.

Wed, 04/23/2014 - 21:43 | 4688756 edotabin
edotabin's picture

The only difference is that the collective human consciousness is rising. This rise is occurring far too slow for us but far too fast for the political class to adjust for.

In another 10-20 years even Joe Blow will see straight through this crap.  They gotta act now! So, they rounded up ZERO and KA-PUT-IN to recreate what they felt comfortable with.

 

Wed, 04/23/2014 - 22:34 | 4689080 falconflight
falconflight's picture

You really are an optimist referencing the masses awaking.

Wed, 04/23/2014 - 16:55 | 4687958 LawsofPhysics
LawsofPhysics's picture

please, look at the numbers.  The Fed is not "tapering", they are buying the exact difference between tax revenues and the total budget.  Direct monetization of the difference/deficit.  There has not been a need to buy anymore.  This will get interesting this summer when the government has to either i) raise taxes or ii) the Fed has to print even more (start expanding QE again).

Tick tock, tick tock...

 

Wed, 04/23/2014 - 15:55 | 4687737 ebear
ebear's picture

All this talk of QE failing is nothing more than political ass covering.  QE was never meant to stimulate a recovery in the Keynesian sense,  it was a backdoor trick to reliquify overleveraged banks that got caught in the 2008 collapse. 

Feh, I don't even know why I'm writing this - it's so obvious a child could figure it out.

Wed, 04/23/2014 - 17:43 | 4688155 NotApplicable
NotApplicable's picture

Well, actually it WAS intended to stimulate a recovery in the Keynesian sense. Problem is, Keynesian rhetoric is incoherent, and thus requires all of this political ass covering (all while the political class obtains all of the loot).

Pulling forward future demand does nothing for those of us who wish to prosper in the future. But hey, we're seeing some of the most creative efforts ever to ensure that all of the seed corn is destroyed/consumed before next planting season.

Wed, 04/23/2014 - 15:56 | 4687732 madtechnician
madtechnician's picture

You cannot taper a Ponzi Scheme. It either continues or collapses. They won't let it collapse until a new financial system is running in parallel.

Wed, 04/23/2014 - 16:56 | 4687964 centerline
centerline's picture

What to do about all those promises that will be broken in the process though?...  The free shit army that will go berserk?...  etc.

Thu, 04/24/2014 - 05:15 | 4689541 madtechnician
madtechnician's picture

The Free Shit Army will discover that nothing in life is actually free.

Wed, 04/23/2014 - 15:14 | 4687563 Colonel Walter ...
Colonel Walter E Kurtz's picture

It has not failed (yet), we here in the U.S. have avoided paying for all the underfunded/bankrupt pensions for 5 years due to the magic levitation of the stawk market. But it is going to be a fight when Detroit's pension issue visits another couple hundred  municipalities/school districts in the near future.

Wed, 04/23/2014 - 14:10 | 4687291 Save_America1st
Save_America1st's picture

c'mon, this is easy.  one word:  Quadrillions

There's a thousand Trillion in a Quadrillion, people.  They've got plenty of printing to go ahead of them.  

I think 'Ol Yellen's gnarled old fingers just cramp up too easy hitting control-P all day.

Maybe they need a young bitch like Blythe "The Wicked Witch" Masters with her nimbly witch fingers to help out. 

Wed, 04/23/2014 - 15:24 | 4687596 MeelionDollerBogus
MeelionDollerBogus's picture

Why make quadrillions when we could make... berzillyuns?

Wed, 04/23/2014 - 15:36 | 4687639 dontgoforit
dontgoforit's picture

Yellinions!

Wed, 04/23/2014 - 14:24 | 4687345 WhyWait
WhyWait's picture

Just get used to scientific notation.  $1E9, $1E12, $1E15, easy once you get the hang of it.  A trillion trillion trillion dollars takes no more ink than a trillion if you round it to the nearest trillion trillion.

Wed, 04/23/2014 - 15:35 | 4687633 Jethro
Jethro's picture

Can't wait to see bank notes with expiration dates on them...

Wed, 04/23/2014 - 16:09 | 4687795 MisterMousePotato
MisterMousePotato's picture

You think that's a joke, but I recall some discussion about a year or two ago about that very thing. (Intended to increase the velocity of money.)

Wed, 04/23/2014 - 16:43 | 4687913 Seasmoke
Seasmoke's picture

As a ticket broker, I can respect that !!

Wed, 04/23/2014 - 13:46 | 4687201 NRGIsFree
NRGIsFree's picture

Taper... per haps in ""taper" terms. Yet somehow Belgium is picking up the slack. Yes the centrally controlled banks are irreconcilably broken. Taper not possible. What will end this? Boosting the markets is getting increasingly expensive. When momentum changes the collapse will be unstoppable. It will of course be "Evil Russia" causing instability.

Wed, 04/23/2014 - 15:28 | 4687608 MeelionDollerBogus
MeelionDollerBogus's picture

Hm. Market needs to react to Fed forward guidance. Many already know Gartman is instantly wrong on everything.
Let's make this interesting. Hire Gartman into the Fed to give the Forward Guidance policy!

Wed, 04/23/2014 - 14:08 | 4687287 sgt_doom
sgt_doom's picture

Recommend listening to this excellent interview of Nomi Prins and her recent book, All The Presidents' Bankers.

https://soundcloud.com/#eddieleakscom/alex-jones-talks-to-naomi-prins-about-her-new-book

 

Wed, 04/23/2014 - 13:39 | 4687176 topshelfstuff
topshelfstuff's picture

is it this ?

 

BRICS aim to finish development bank preparations by July summit

WASHINGTON Fri Apr 11, 2014

 

(Reuters) - The BRICS bloc of emerging economies will have all preparatory work done for setting up its development bank by the group's summit in July,

Wed, 04/23/2014 - 13:34 | 4687142 moneybots
moneybots's picture

"First came the San Francisco Fed with a study revealing that QE generally doesn’t appear to generate economic growth"

 

First came Bernanke in 1988, saying that QE does not work.

Wed, 04/23/2014 - 15:34 | 4687628 dontgoforit
dontgoforit's picture

Eff'em - we just won't pay them back....they did the borrowing....

Wed, 04/23/2014 - 13:30 | 4687123 jjsilver
jjsilver's picture

That is a nice way of saying, we have pretty much stolen or destroyed the wealth of people, and those we haven't, we have enslaved with our debt created from nothing.

Wed, 04/23/2014 - 13:17 | 4687058 cro_maat
cro_maat's picture
"Central Banks Have Realized Their Worst Nightmares Are Approaching"

 

Central Banks serve their shareholders / masters and only have nightmares about oil, drugs and weapons being traded for gold.

 

Wed, 04/23/2014 - 13:14 | 4687052 kchrisc
kchrisc's picture

Let me say it again: "It is not 'policies,' but organized theft."

Ponzi on, Garth!

Wed, 04/23/2014 - 17:55 | 4688198 Spigot
Spigot's picture

"...I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time…"

Dear God in heaven, what a lying scum bucket this asshole is. Every last one of these fuck-tards knew EXACTLY what they were doing to bail out their monied masters. They crafted the narratives, and delievered the goods. End of story.

Disclosure: long rope manufacturers

Wed, 04/23/2014 - 22:38 | 4689092 falconflight
falconflight's picture

Well maybe so, but I submit that an act of telling the truth is nearly an act of revolution in today's USA.

Wed, 04/23/2014 - 18:33 | 4688313 kchrisc
kchrisc's picture

Apology not accpeted. No "Truth and reconciliation" here. We know the truth and will do the "reconciling."

 

"My guillotine is good at reconciliation."

Wed, 04/23/2014 - 13:11 | 4687044 cro_maat
cro_maat's picture

BS - The FED is not tapering. They are shifting asset purchases to Belgium and other CB brethren. Not only that but they will ramp up QE as the financial cracks grow wider.

A summary of FED guidance is a propaganda summary and meaningless.

Wed, 04/23/2014 - 14:49 | 4687445 Citxmech
Citxmech's picture

The Fed and every other financial mouthpiece of the machine are pretty easy to predict.  Basically, any action is accompanied by the media whores singing in unison that this is a sure sign of "Moar profit!" and "Moar growth!"

Of course what they do has no correlation to what they say, and even less correlation to the actual state of the economy.

Bottom-line, you can't alter the underlying measure of the economy by changing the scale on the ruler. 

Wed, 04/23/2014 - 15:33 | 4687626 MeelionDollerBogus
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