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BOE's Andy Haldane Finds Impact Of Central Bank Policies As Bad As A "World War"

Tyler Durden's picture





 

Those curious why Goldman Sachs felt compelled to undertake a quiet an unexpected by most (if not us) peaceful coup of the Bank of England, it is because the oldest central bank still has among its ranks people such as Andy Haldane, who in a world populated by deranged textbook economists who don't understand that it is the central bank policies' fault the world will be forever mired in substandard growth and soaring unemployment, is a lone voice of reason (recall BOE's Andy Haldane Channels Zero Hedge, Reveals The Liquidity Mirage And The Collateral Crunch). And since the BOE has no choice but to join all its peers in a global race to the bottom (largely futile in a world in which currencies exist in a closed loop, and in which if everyone devalues, nobody devalues as even Bill Gross figured out yesterday), it is prudent to listen to Haldane's warnings while he is still in the employ of Her Majesty the Queen. Such as his latest one, in which he says that the scale of the loss of income and output as a result of the crisis started by the banks was as damaging as a "world war."

From the Telegraph:

The economic impact of the global financial crisis has been as bad as a world war and as a result public anger at banks was reasonable and understandable, said Andrew Haldane, a senior Bank of England official

 

Mr Haldane, the Bank's executive director for financial stability, told BBC Radio 4's The World at One on Monday that the scale of the loss of income and output as a result the crisis started by banks was as damaging as a "world war".

 

"There is every reason why the general public ought to be deeply upset by what has happened – and angry," he said.

 

"If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren."

 

Mr Haldane, the Bank's executive director for financial stability, said banks needed to be more honest about the risky assets on their books if confidence was to be restored to the system and lending to business was to flow again.

 

"Investors will be much less willing to put their money into the banking system. They will lack confidence in the banking system and will either charge very high rates for lending that money to banks or will just withdraw their money entirely," he warned.

 

He urged banks to "spring clean" their balance sheets to get credit into the system and create a "springboard" for a recovery in the economy.

Visually, what Haldane is referring to is that the nearly $7 trillion in savings deposits at various US banks (not to mention the countless trillions across the world) are sitting inert instead of generating a given percentage of income on this money. Indicatively, assuming a 5% interest rate, that $7 trillion would generate $350 billion in annual purchasing power each year, or over 2% of GDP. This also excludes the tens of trillions invested in fixed income instruments which in a normal world would also generate fixed income, and instead generate nothing under ZIRP.

Of course, what Haldane is effectively saying is that the all credit bubbles eventually pop, and when they do the general population suffers the same fate as when society is crushed by all out global warfare. And since it is the central banks who are always the permissive factors in pushing free money into the banking system, and engaging in such policies as ZIRP which mean zero income on bank savings, and finally - regulating said banks (or not as the case always is - just observe the latest spectacular blow up in JPM's "safe" internal hedge fund CIO division), what Haldane is saying is that while the world may have eliminated conventional warfare within the developed world, the economic consequences of the same kind of failed central planning the led to the Lehman collapse and the Great Financial Crisis are just as bad.

In essence, by removing the danger of conventional war (which however is once again rapidly rising in various parts of the world with the ascent of nationalistic political forces), central banks have ushered in a just as destructive, cyclical economic world war, which brings the same long-term social ravages as bombing campaigns if not the same immediate carnage.

But don't tell this to the economists who believe they can run the world from their ivory towers. After all, if only enough money is unleashed on the world (and by unleashed we mean diluted because banks may print 1s and 0s indicative of money, they can never create real wealth and asset productivity), all should be well. Just ask that "famous" liberal columnist from the NYT: after all he has a Novel prize.

 


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Mon, 12/03/2012 - 16:47 | Link to Comment Aziz
Aziz's picture

I bet Haldane reads Zero Hedge.

Mon, 12/03/2012 - 19:11 | Link to Comment Peter Pan
Peter Pan's picture

Maybe he is even one of its ghost writers.

Mon, 12/03/2012 - 21:21 | Link to Comment philipat
philipat's picture

I thought that Krugman had a Nobel prize not a Novel Prize as printed. Although, come to think of it.................

Tue, 12/04/2012 - 08:13 | Link to Comment SmackDaddy
SmackDaddy's picture

As bad as a world war?  Really?  Because a bunch of assholes arent earning on their savings accounts?  Get the fuck out of here....  This fight club is full of pussies...

Mon, 12/03/2012 - 16:50 | Link to Comment woggie
woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly
http://youtu.be/ntmthFyaYzY

Mon, 12/03/2012 - 23:02 | Link to Comment StychoKiller
StychoKiller's picture

Greetings, fellow robot!

Mon, 12/03/2012 - 16:54 | Link to Comment I am more equal...
I am more equal than others's picture

Indicatively, assuming a 5% interest rate, that $7 trillion would generate $350 billion in annual purchasing power each year, or over 2% of GDP.

What would be the cost of debt service - interest only - on the national debt at 5%? Surely that would offset any gains in GDP. So goes the cirle of love.  You gotta give to get.

 

Mon, 12/03/2012 - 16:56 | Link to Comment Ghordius
Ghordius's picture

Interesting, though I find the comparison to wars utterly stretched
does the word really sell that well?

Mon, 12/03/2012 - 18:16 | Link to Comment Sandmann
Sandmann's picture

Why ? Financial Repression is how the USA and UK paid for WWII - 40 years of eroding household wealth through negative real interest rates - the Uk coupled it with Exchange Controls until 1980

Mon, 12/03/2012 - 18:25 | Link to Comment CalDre
CalDre's picture

 

Good point that puts the claim "in a world in which currencies exist in a closed loop, ... if everyone devalues, nobody devalue", since in this case the devaluation is not inter-currency block (e.g., EU vs USA) but inter-class block (fixed income vs equity).  And obviously the vast bulk of people (from welfare recipients to bond holders to factory workers) have fixed income.

So what the devaluation really does is bring austerity to the great bulk of people who cannot negotiate up their salary, while shifting that extra income to the government and the elite.

Merry Christmas.

Tue, 12/04/2012 - 00:35 | Link to Comment Doctor Who
Doctor Who's picture

In my limited understanding, central banks used war for their own ends until they had saturation of the currency.  Their funding has been to their own ends whether war or total government control.  Isn't this hundreds of years old?  Once they lose control won't they revert back to war?

Tue, 12/04/2012 - 06:28 | Link to Comment Sanksion
Sanksion's picture

War is already unavoidable. We don't have the choice to go or not to go, we are in, whatever we wish it or not.
The dynamic of this war is hundreds of years old, and as usual, based on religion. The number of powers (Musliam Arabs and Persian, Russia, China, Occident and Israel) deploying their pieces doesn't lie. Only the dead see the end of war.

Mon, 12/03/2012 - 16:57 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Obviously, Carney will dump this fellow asap...

Mon, 12/03/2012 - 17:01 | Link to Comment Aziz
Aziz's picture

Carney already said he says Haldane doesn't "understand regulation"...

http://www.telegraph.co.uk/finance/economics/9705748/Carney-attack-on-Ha...

I'm sure Haldane's replacement will have the words "Goldman Sachs" on his or her resume...

Mon, 12/03/2012 - 20:20 | Link to Comment piceridu
piceridu's picture

...and he's gone

Mon, 12/03/2012 - 17:18 | Link to Comment Stuck on Zero
Stuck on Zero's picture

If you look over the devastation of our factories throughout the MidWest it looks like the aftermath of war.

The bankers caused that.

Mon, 12/03/2012 - 17:26 | Link to Comment Quinvarius
Quinvarius's picture

Spoken like a man who has never had a NAZI 1000 pound bomb dropped on his house.

Mon, 12/03/2012 - 17:33 | Link to Comment akak
akak's picture

You say that like it is a bad thing!

After all, bomb damage is only transitory --- plus, just think of the boost to national GDP from all the rebuilding!

What are you, anti-progress or something?

Mon, 12/03/2012 - 17:27 | Link to Comment drbill
drbill's picture

 

"If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren."

 

Mostly I like what he says, but the truth is, that which can't be repaid, won't be repaid. Bankers would love if our children or grandchildren paid them back. But I sincerely hope that our children or grandchildren will come to see central banking for the cancer it is and tell the banksters to *&%# themselves. Or better yet, just start hanging them.

 

 

Mon, 12/03/2012 - 17:40 | Link to Comment dearth vader
dearth vader's picture

Actually, there's one definite cure to the bankster disease. It was invented by a French doctor, by the name of Guillotine.

Mon, 12/03/2012 - 19:13 | Link to Comment WTFx10
WTFx10's picture

Death is way to easy, stripped of their illegal wealth they shall be put to the fields to work as a migrant farm worker picking the masses food stuffs, they shall earn the same amount as the farm worker earns now and learn how to live on it. They can try to get the cabbage,lettuce.strawberry's,and apples to listen to them as they cry. Is that cruel and unusual punishment for their crimes against humanity? Hardly. They will still have a shot at the American Dream when they sleep, just like the rest of the 300 plus million they fed that lie to. They can still buy lottery tickets, they can sell stuff on ebay. McDonald's has a great dollar menu if they don't know how to cook.

Death is way to easy for these fuckers. Make them work with their hands to survive the only thing they can steal is what they can pick off the plants.

Mon, 12/03/2012 - 18:17 | Link to Comment Darth Rayne
Darth Rayne's picture

With just one length of rope we could hang all bankers, eventually. Then start on the politicians. One at a time.

Only joking, hangings to good for em.

 

This is something that only God can sort out. kill em all.

 

Only joking. 99.99% of them think they are of benefit to society. Who knows, may be we are wrong!

 

Sell all pm's and get a big mortgage and buy plastic crap from wherever. Don't watch fight Club.

Tue, 12/04/2012 - 05:47 | Link to Comment Dugald
Dugald's picture

This presuposes that the Bwankers will wait that long, I dont see that happening as they are controlled by greed.

Mon, 12/03/2012 - 17:48 | Link to Comment topspinslicer
topspinslicer's picture

to say much of Detroit looks like it has gone through a war is no stretch of the truth -- see what statist central planning can do for you?

Mon, 12/03/2012 - 18:08 | Link to Comment Zaydac
Zaydac's picture

see what statist central planning can do for you?...

and bad product design...

and excessive union demands...

and bent executives cooking the books...

These things are never as simple as they first seem.

Tue, 12/04/2012 - 05:51 | Link to Comment Dugald
Dugald's picture

see what statist central planning can do for you?...

and bad product design...

and excessive union demands...

and bent executives cooking the books...

Ah yes the "American Way"..........

 

Mon, 12/03/2012 - 18:13 | Link to Comment akak
akak's picture

NOBODY who has not extensively toured the city of Detroit (not necessarily speaking of its suburbs) can appreciate, or probably even believe, how decayed, degraded and hopeless that wreck of a formerly great city really is.

Mon, 12/03/2012 - 17:50 | Link to Comment EscapingProgress
EscapingProgress's picture

What happens when you combine destructive central bank policy with a world war? O'boyo wants to know.

Mon, 12/03/2012 - 17:53 | Link to Comment drbill
drbill's picture

Stimulus!

Mon, 12/03/2012 - 17:49 | Link to Comment IamtheREALmario
IamtheREALmario's picture

I know quite a few people who are living in a Machiavellian dream world of "power" being the ONLY thing... and seemingly they do not have any understanding of why they have such beliefs, or the consequence of such beliefs.

My question is always: "to what end, power?" (bring memories of James Earle Jones as Thulsa Doom, commenting to Arnie that flesh is stronger than steel)

Mon, 12/03/2012 - 18:12 | Link to Comment earleflorida
Mon, 12/03/2012 - 20:54 | Link to Comment Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

"The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power." ~1984

Mon, 12/03/2012 - 23:19 | Link to Comment Anusocracy
Anusocracy's picture

Control (power) is a very successful survival adaptation.

If control is a bell curve distribution, then some people are going to be high function control freaks.

Tue, 12/04/2012 - 16:48 | Link to Comment dvfco
dvfco's picture

Or, as my former boss used to aay, 'cui bono' meaning exactly 'for whose benefit' in Latin. It used to annoy the shit out of me becaue it always came when I was driving 60 miles per hour down a side street in Brooklyn, NY.    He'd quietly ask "Cui Bono" and (when I finally found out what it meant) I'd respond "My own - it will allow me to get you out of my car sooner, rather than later, and for me to get on with my life."  

 

I was really thinking, "I hope someone T-Bones the car on the passenger side you pain in the ass.  Maybe you'll shut upp then."  We were very close!

Mon, 12/03/2012 - 19:21 | Link to Comment Peter Pan
Peter Pan's picture

They use to say that the sun never sets on the British Empire.
By the looks of things England will sooner or later be faced with a permanent solar eclipse if the current policies are pursued.

Mon, 12/03/2012 - 21:36 | Link to Comment George Washington
George Washington's picture

Here's to you, Andy:

http://i.imgur.com/MWeN3.jpg

(As the floodwaters of inflation rise up around our ankles ...)

 

aoSKU Mainstream Economics is a Cult

“Our models show there is no chance of water”

 

 


Tue, 12/04/2012 - 02:01 | Link to Comment prains
prains's picture

Not only is it a cult but a place to propogate psuedo science as fact when really it is nothing but fiction. All parties are intended to act rationally and in their best interest. "Best interest" they got right, the rational part has fucked any model these wankers have ever dreamed up. Really all economic models should be based on tit for tat, winner take all and then we're talking reality.

Mon, 12/03/2012 - 21:08 | Link to Comment fiddy pence haf...
fiddy pence haff pound's picture

to paraphrase Dilbert, I wonder when Haldane became a Communist.

Seriously though. He knew he was getting turfed out for the GS man.

they tried to pin the Lie bore stuff on him, just to scare him off.

 

Mon, 12/03/2012 - 21:10 | Link to Comment fiddy pence haf...
fiddy pence haff pound's picture

walk towards the light Andrew. Oh, it's an oncoming train!

Mon, 12/03/2012 - 21:26 | Link to Comment BeagleOne
BeagleOne's picture

That MOFO looks like Donald Rumsfeld...

Tue, 12/04/2012 - 01:13 | Link to Comment RECISION
RECISION's picture

So, we don't even need to actually hold the War anymore.... 

Why go to all that effort afterall?

We can now just go directly to the end game through central bank accounting.

Tue, 12/04/2012 - 01:16 | Link to Comment TwoHoot
TwoHoot's picture

"After all, if only enough money is unleashed on the world (and by unleashed we mean diluted because banks may print 1s and 0s indicative of money, they can never create real wealth and asset productivity), all should be well."

You can't make tortillas out of digital 1s and 0s? What will we eat?

 

Tue, 12/04/2012 - 01:33 | Link to Comment AldoHux_IV
AldoHux_IV's picture

First North Korea finds a unicorn and now a central banker with some actual insight and truthiness... UNPOSSIBLE.

Tue, 12/04/2012 - 02:00 | Link to Comment Bastiat009
Bastiat009's picture

Quote:

"Mr Haldane, the Bank's executive director for financial stability, told BBC Radio 4's The World at One on Monday that the scale of the loss of income and output as a result the crisis started by banks was as damaging as a "world war".

Headline:


BOE's Andy Haldane Finds Impact Of Central Bank Policies As Bad As A "World War"

Not exactly the same story. 

Tue, 12/04/2012 - 02:48 | Link to Comment Steverino
Steverino's picture

..unless of course the banks are simply waiting to finance another highly profitable war....

Tue, 12/04/2012 - 17:16 | Link to Comment dvfco
dvfco's picture

I suggest an annual "Zero Hedge Prize in Economics" be  awarded to an economist (or jut someone with great ideas) who has actually furthered the field of economics in a way that is beneficial to mankind.  It would probably be a lot like what Nobel would have wanted.  In this case, the winner gets no money, but has the undying praise of our great nation, the true respect and admiration of the ZH reader base, and the knowledge that they aren't in the same category of fools like Paul Krugman.  Further, no other ZH awards would be awarded (other than, maybe, literature?), so the winner wouldn't never be spoken about in the same breath as recent Nobel winners  - Barack H. Obama (no shit?), The European Union (WTF?), Al Gore and the Inergovernmental Panel on Climate Change (is that like Davey Jones and The Monkeys?).  The Interantional Atomic Energy Agency & Mohammed ElBaradei, and - well - you get the point.

Seriously, if I were to win a Nobel Prize, I'd wait for the check to clear and then let them know they're a bunch of truly dumb phucks.  

If I won the ZH award, I'd be honored. 

 

 

 

 

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