Hong Kong Fed's Epiphany: Is Bernanke Wrong About Everything?

Tyler Durden's picture

It seems not every nation's head of central banking believes in the Bernanke Doctrine of moar QE is better QE... Hong Kong Monetary Authority Chief Executive Norman Chan said Monday that quantitative easing is not a panacea, and added:

...there is a possibility that the process of deleveraging is disrupted by quantitative easing, leading to sharp increases in asset prices in the first place. Yet, since such increases are not supported by economic fundamentals, any increase in wealth will be seen as transient... (and asset prices might drop sharply and remain volatile). As a result, households are unwilling to increase spending and in the end, the real economy fails to rebound.

 

Via CRI English:

Hong Kong Monetary Authority Chief Executive Norman Chan said Monday that if the process of deleveraging is disrupted by quantitative easing, asset prices might drop sharply and remain volatile.

 

When delivering a speech entitled the Global Deleveraging: The Right Track at the Hong Kong Economic Summit 2013, Chan said that excessive leveraging, or over-borrowing, in major industrialized countries was the root cause of both the global financial crisis and the more recent sovereign debt crisis plaguing Europe.

 

Chan said quantitative easing is not a panacea, but it is the exact opposite of deleveraging. In the past three years, quantitative easing had limited stimulating effect on the real economy. "In order to solve the structural imbalances built up in the past two decades, we must get to the bottom of the problem."

 

There is a possibility that quantitative easing produces the desired results, which is a very desirable scenario as global economy will return to its normal growth path, he noted.

 

However, there is a possibility that the process of deleveraging is disrupted by quantitative easing, leading to sharp increases in asset prices in the first place. Yet, since such increases are not supported by economic fundamentals, any increase in wealth will be seen as transient.

 

As a result, households are unwilling to increase spending and in the end, the real economy fails to rebound, if inflationary pressure builds up alongside asset price increases, central banks may consider exiting the market and raise interest rates, the authority's head said.

 

When economic performance, inflation or monetary policy falls short of market expectation, asset prices might drop sharply and remain volatile, he added.

 

Chan said he was certain that since the outlook for macro economic and financial environment is very uncertain, it is highly possible that large fund inflows and outflows as well as sharp fluctuations in the financial markets will continue to be seen.

 

"We should all take precautionary measures and get to the bottom of the problem, learn from others' experiences and avoid overstretching ourselves. Otherwise, we may find ourselves being trapped in the debt abyss with no way out," he said.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
sangell's picture

+100

or as Frank Zappa put it in 'Trouble Coming Everyday"

You can cool it, you can heat it, cause baby I don't need it!

trav777's picture

Jeezus H Christ...they were worried the money would go to speculation instead of something good...like LOANS?

LOANS ARE THE FUCKING PROBLEM.  There is one in a hundred who understands that there is a world outside this fishtank.

All these people ever talk about is LOANS and GROWTH...failing to understand that these two words together imply a mathematically INEVITABLE brick wall at some point.

All the bankers talk about is growing credit, the economists growing production, grow grow grow.  Growth is limited.

akak's picture

The only thing in nature that grows without limit, eventually dooming itself in the process, is cancer.

Is that REALLY the model we want to follow as a society?

centerline's picture

Remind me again whose property market is going ape shit right now?

MFLTucson's picture

I suggest the American people look at what this whole group of Jewish bankers has done to the world and to America and ask yourself, how much more of this shit are you prepared to take because I for 1 have had enough of these gangsters and want someone other than another Jew in like Dimon or another decision by a Jew. They cannot be trusted and have not proven they are worthy of our trust if history is any guide. From Rome to Germany to the US, it is the same group of people that have bankrupted each and every country to further their own agenda and steal from the working man.

I don’t care what Bernanke says and trust nothing he says or does, he is a liar and a con man and he is just another member of the Rothschild TRIBE!  Go on and call me any names you want and make fun of me but facts do not lie!!

 

Athenian's picture

Jamie Dimon is not Jewish. He comes from a Greek background.

Element's picture

Oh gezus h krist!  There's the problem right there!

 

Evil-twin Darth Socretes took up banking!

Seasmoke's picture

No Shit , Ichiro !

ApollyonDestroy's picture

WHY AM I STILL PAYING MY TAXES !?

mayhem_korner's picture

 

 

Think of it as supporting 40% of someone else's SNAP card. (The other 60% is being sponsored by your grandkids)

Cloud9.5's picture

Because the IRS has guns and prisons.

Element's picture

According to MMT Ben could pay everyone's taxes, ... even timmahs!

 

I'm on for MMT bitchez!

 

"No chance of that!"

e-recep's picture

coz you dont wanna live next to bubba in jail.

IridiumRebel's picture

So they agree with us that he is a fuckhead....great minds think alike.

Aquarius's picture

Perhaps we should consider that the Great Depression of the '30's was a lesson to be learn't,

but,

which we preferred to ignore?

so, we get to repeat the course courtesy, of our ignorance?

Will we do our homework this time?

Ho hum

ApollyonDestroy's picture

Ignorance and absolute arrogance. Except this time it's going to make the '30s look like a cake walk ; )

Honestly speaking, how many can produce for themselves, let alone live dozens of miles outside of a city. Fun to joke about and "predict". But when shtf maybe 1% of people are adequately prepared. So many guns and so little food; that's going to be pretty

Element's picture

 

 

"so, we get to repeat the course courtesy, of our  E N G I N E E R E D  ignorance?"

 

Fixed it for you. :D

surf0766's picture

Is this the part where they start telling the truth and no one believes them because they have lied for so long? Are all the pieces in place for the staged gradual decline in the dollar as the GRC

booboo's picture

Chan missed out on one of our fine Ivey League Edjukashuns. 

Weyland_Yutani's picture

I'm Swedish but live in Hong Kong since 2 years and the inflation rate here is off the charts because the HK dollar is pegged to the US dollar. Of course, the politicians are blaming all price increases on lack of supply, increase in demand from China, the crisis in the Middle East and everything else except the fact that the HK Central Bank is printing money like mad men.

House prices are up 100 % in 3 years.

The price of electricity will be raised 6 % in January.

The price of a fucking cake at my local bakery is up 18 % since last year.

 

Back in 2008 I could buy a litre of milk for 10 HKD. Now I have to pay 17 HKD. It's absolutely ridicilous.

akak's picture

Weyland, thanks for the interesting perspective, which as an American living in my oh-so-insular culture I am always glad to hear.

On a different note, and just trying to be helpful, you should know that the phrase you used, "since 2 years", while for some reason a VERY common construction among northern Europeans who speak English as a second language, is incorrect and meaningless on the face of it.  What you should say here instead would be either, and preferably, "for the last two years", or alternately, "since two years ago".  For some reason, many foreigners seem to have a very hard time with the "ago" part of expressing time duration from the past into the present in English.

Cthonic's picture

Any foreigner, northern European or not, willing to take a swing at learning the bastard language English is already half good in my book*.  Akak which would you prefer to puzzle over, a post in perfectly understandable (if not perfectly correct) English, or a post in Swedish or friggin' Chinese!?

 

*AnAnonymouse excepted

akak's picture

Proper 'american' grammaticalism is the mattering thing, the crustiest bit of an important semantic something.

In US 'american' citizenism, correct conjugationalisticalism is a middle class thing, as the middle class is the spelling class.  But grammatical nitpickingism is part of US 'american' eternal nature, just have to bear with it.

akak's picture

Oh, I totally agree Cthonic --- I have always said that I am SO glad that I did not have to learn English as a second language!  The spelling alone is an abomination, and the many odd sounds that are almost unique to it must be a never-ending headache for non-native speakers.  In fact, I was just discussing this very subject with a group of Poles yesterday, and some of them, even after 30 or more years living in the USA, have problems with various aspects of English spelling, grammar or pronunciation --- and I blame them not at all.  I was merely trying to offer a bit of friendly constructive advice to Weyland above, as I have seen so many non-native English speakers (and writers) make that same mistake.

OpenThePodBayDoorHAL's picture

in French it's "depuis deux ans" (since two years) so I see where they get it

akak's picture

In Spanish, it is even more strange yet --- they say "hace dos anos", literally meaning "it makes two years".

Weyland_Yutani's picture

Duly noted. "Since 2 years" is basically what we say in Swedish so it was a bad translation.

 

 

falak pema's picture

since two years or so...my mother never spoke to me about how broke she would be if the price of bread climbed over the roof. As she doesn't like climbing on to roof tops since two years ago. 

fattail's picture

please shut up and keep importing our inflation, because we can't afford to keep it.

 

Ghordius's picture

+1 LOL - duly noted, but please nevertheless stop exporting it because we are getting FED up, too

on a different note, why always Bernanke? Is the great "Maestro" completely blameless because in his youth he wrote some nice comments on gold?

Mike Cowan's picture

He forgot the Fed's mandate to create bubbles.

Milton Waddams's picture

99& of zerohedge has never read bernanke's monetary policy at the zero bound

https://www.google.com/search?q=monetary+policy+at+the+zero+bound  

(here's a hint, your is too late).

akak's picture

Your nipple piercing at age 54 is too late.

Element's picture

ah, wise werds of onahable man of sage exspearwiencesness.

manwy fwanks

lasvegaspersona's picture

It appears the BB was setting us up back then. He was preparing us with an explanation and technical details of what might be done at 'zero'. In actualality he saw the end coming and knew he would be forced to fund the government and thought 'hey. I'd better have some BS reason for doing this or the crowd will just say 'he is just monetizing debt'". In reality all the 'reasons' are just polite distraction from the main purpose....to keep the US government alive a little longer and the global, dollar based economies of the entire world breathing. Eventually it will stop working when the right party says 'enough' or something goes horribly wrong. I say it will be the former....China? the Saudis? The BIS? the ECB? maybe Japan will commit suicide by dollar explosion. This HAS to be getting near endgame! 85B$ a MONTH!!!! The Fed is introducing the market cap of Cisco EVERY MONTH!!! If that works much longer I will begin to believe Bernacke is an evil magician.

Flakmeister's picture

QE or not, it will be deflation until the $ no longer is legal tender for international oil. Then all hell breaks loose....

mayhem_korner's picture

 

 

Deflation in what?  Leveraged, long-lived "assets", yes; staples/commodities, no chance.

Flakmeister's picture

Yes, primarily paper assets... Stables and commodities have not kept pace with any reasonable measure of Money supply so while their prices have gone up, it is not nearly as much as one would expect...   There is collapse in credit that is only being countered by the Fed, i.e. classic deflation, moreover there is grotesque overcapacity in manufacturing... 

And that is the conundrum....

Or in other words this time it *is* different....

akak's picture

I am frequently disgusted by the rising price of stables.

And have you seen the price of mangers lately?!

Flakmeister's picture

Hay, I had to call ahead to make reservations for some guy called Joseph 2 weeks from now. Couldn't believe what they were asking...

akak's picture

At least you made reservations in advance.  Hallelujah that you found one!

That makes you a wise man.

Ident 7777 economy's picture

'The oil ... the oil.'

 

Always with 'the oil' ...

mayhem_korner's picture

 

 

Sum ting wong?

Caviar Emptor's picture

The Fedheads and economists are slowly waking up to smell the coffee: yes, there can be both inflation an deflation in the same economy at the same time. It was not supposed to happen or be possible according to musty textbooks. It wasn't anticipated, just like they never saw 2008 coming. And yet it isn't subtle or deniable anymore since it's on display every day for the whole world to behold. 

This article just scratches the surface of the hows and whys of biflation. The rabbit hole runs deep, it's been getting dug for 4 decades. All of the tricks, fixes and remedies that the global central bankers cobbled together during the era of globalization and credit bubblation are the direct cause of the deflation side of this dilemma. And the current fixes to the post-bubble depression are definitely exacerbating the problem through inflationary pressure on assets and raw materials prices. 

Watch your buying power crumble 

akak's picture

 

yes, there can be both inflation an deflation in the same economy at the same time.

CaviarEmptor, with respect, that is a nonsensical statement, and no, there can NOT be inflation and deflation at the same time.

You are making the classic mistake of confusing cause and effect here.  Inflation is NOT rising prices --- that is just the typical symptom of inflation, which is actually an increase in the money supply over and above the organic growth of the economy.  Likewise, deflation is a decrease in the money supply, generally leading to falling prices (which has by the way, unlike inflation, been vanishingly rare in monetary history).

Sure, we can have rising prices in some things simultaneously with falling prices in others, but it is simply wrong to call either one by itself "inflation" or "deflation", much less claim that they are happening at the same time.  The two phenomena are mutually exclusive --- it would otherwise be like saying "The sun is rising but it is also setting".

 

PS: While disagreeing on the terminology of what is happening, I otherwise agree with your analysis and observations.