Guest Post: Is Present Monetary Policy Rational?

Tyler Durden's picture

Submitted by Detlev Schlichter of,

While the stance of monetary policy around the world has, on any conceivable measure, been extreme, by which I mean unprecedentedly accommodative, the question of whether such a policy is indeed sensible and rationale has not been asked much of late. By rational I simply mean the following: Is this policy likely to deliver what it is supposed to deliver? And if it does fall short of its official aim, then can we at least state with some certainty that whatever it delivers in benefits is not outweighed by its costs? I think that these are straightforward questions and that any policy that is advertised as being in ‘the interest of the general public’ should pass this test. As I will argue in the following, the present stance of monetary policy only has a negligible chance, at best, of ever fulfilling its stated aim. Furthermore, its benefits are almost certainly outweighed by its costs if we list all negative effects of this policy and do not confine ourselves, as the present mainstream does, to just one obvious cost: official consumer price inflation, which thus far remains contained. Thus, in my view, there is no escaping the fact that this policy is not rational. It should be abandoned as soon as possible.

The policy and its aims

The key planks of this policy are super low interest rates and targeted purchases (or collateralized funding) of financial assets by central banks. While various regional differences exist in respect of the extent of these programs and the assets chosen, all major central banks – the US Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan – have been engaged and continue to be committed to versions of this policy. Its purpose is to facilitate exceptionally cheap funding for banks and to affect the pricing of a wide range of financial assets, in particular and most directly government bonds but also mortgage bonds in the US and real-estate investment trusts and corporate securities in Japan. There is an ongoing debate in the UK and in the Euro Zone, too, about directly boosting prices of other, ‘private’ securities, that is, to have their prices manipulated upwards by direct purchases from the central banks.

To the wider public this policy is described as ‘stimulating’ growth, ‘unlocking’ the flow of credit and ‘jump-starting’ the economy. If that is indeed the aim, this policy has already failed.

We have now had almost five years of near-zero interest rates around the world. If such low interest rates were indeed the required kick-starter for the economy, we should have seen the results by now. ‘Stimulus’ is something that incites or arouses to action, a kind of ‘ignition’ that sets off processes, in this case, one assumes, a self-sustained economic recovery. But if the world economy was really fundamentally healthy and only in need of a dose of caffeine to stir it back into action, then dropping rates from around 4 to 5 percent to zero, as happened already 4 or 5 years ago, should have done the trick by now.

Defenders of the policy will argue that we would all be in much more of a bind without it but this is not the point here. This is something we can discuss when comparing costs and benefits. There is no escaping the conclusion that this policy has failed if its aim is to provide a required ignition – the stimulus – to ‘jump start’ the economy.

In support of my conclusion that this policy has failed as a ‘kick-starter’ of self-sustained growth I can quote as witnesses the very officials and experts who advocated this policy in the first place and who are still implementing it. Not a single one of the major central banks is even close to announcing the successful conclusion of these policies or is even beginning to contemplate an exit. 5 years into ‘quantitative easing’ and zero interest rates, the Fed last week began to openly consider increasing its monthly debt monetization program. Although the week ended on a bright note, at least for the professional optimists out there, as the unemployment rate came in a tad lower than expected, manufacturing data during the week was disappointing and the US economy is evidently entering another growth dip.

Still, many argue that the roughly 2 percent growth that the US economy may achieve this year is nothing to be sniffed at. Yet, for a $15 trillion dollar economy that is just $300 billion in new goods and services. In the first quarter of 2013, the Fed expanded the monetary base by $300 billion alone, and the central bank is on course for $1 trillion in new money by Christmas, while the federal government will run a close to $1 trillion deficit despite the ‘sequester’. That is very little growth ‘bang’ for a lot of stimulus ‘buck’. Self-sustained looks different.

Last week in the Euro-Zone, the ECB cut its repo rate to 0.5%, a record low. If suppressing interest rates from 3.75% in 2007 to 0.75% by 2012, has not lead to a meaningful, let alone self-sustaining recovery, or at a minimum the type of underachieving recovery that would at least allow the ECB to sit tight and wait a bit, what will another drop to 0.5% achieve?

Shamelessly, some economists and financial commentators cite high youth unemployment in countries such as Spain as a good reason to cut rates further. The image that is projected here is evidently one of countless Spanish entrepreneurs standing at the ready with their investment projects, willing and eager to employ numerous Spanish young people if only rates were 0.25% lower. Then all their ambitious investment plans would become potentially profitable, and the long promised recovery could finally commence.

The number of young Spanish people who will find employment thanks to the ECB cutting rates close to zero cannot be known but I suggest a number equally close to zero is a reasonably good guess.

The ‘benefits’ – or are they costs?

This is not to say that this policy has no effects. It even had benefits, for some.

By suppressing market yields and boosting the prices of financial assets this policy has delivered substantial windfall profits for owners of stocks, bonds, and real estate. Those who did, for example, speculate heavily on rising property prices in the run-up to the recent crisis, then were put through the wringer by the financial meltdown, now find themselves happily resurrected and restored to their previous wealth, if not more wealth, courtesy of central bank charity.

The 0.25% rate cut from the ECB may not lift many young Spaniards into employment but it surely makes ‘owning’ financial assets on credit cheaper. For every €1 billion of assets the rate cut means a €2.5 million saving per year in cost of carry, as duly noted by the big banks, ‘investment’ banks and hedge funds. After the ECB rate cut, German Bunds reached new all-time highs as did, a few days later, Germany’s main stock index.

That we are witnessing strange and dangerous deformations of the capitalist system, if we can still even call it capitalist, and that new bubbles are being blown everywhere, is not only evident by the increasingly grotesque dichotomy between a woefully underperforming real economy perennially teetering on the brink of renewed recession and a financial system, in which almost every sector is trading at record levels, but also by the fact that the high correlation among asset classes on the way up to new records is beginning to strain the minds of the economists to come up with at least marginally plausible fundamental justifications for such uniform asset inflation. ‘Safe haven’ government bonds that would usually prosper at times of economic pain are equally ‘bid only’ as are risky equities and the grottiest of high yield bonds. The common denominator is, of course, cheap money. And if cheap money for the foreseeable future is not enough, then how about cheaper money – forever?

A conflicted conscience or outright embarrassment are now stirring some financial economists to suggest that the joys of bubble finance should be brought straight to the economic war zones in the European periphery, and that in order to have a bigger impact on the ‘real’ economy, the ECB should buy private loans and other local assets in these regions and thus more directly interfere in their pricing. The manipulations of the monetary central planners are too blunt, they need to be more fine-tuned. These suggestions are dangerously wrongheaded. Extending the addiction to the monetary crack cocaine of cheap credit beyond the financial dealing rooms of London, New York and Frankfurt and to the economy’s productive heartland is not going to solve anything, at least not in the long run, and that is a timescale that may still matter to some people, at least outside of the financial industry. Spain needs nothing less than a new artificially propped up real estate boom. The aforementioned Spanish youth would only swap today’s dependency on state hand-outs for dependency on never-ending cheap-credit policies from the ECB and ongoing asset-boosting price manipulations. This has nothing whatsoever to do with sustainable growth, lasting and productive employment and real wealth creation.

The fact that trained economists today seriously contemplate these policies and are willing to dress them up as ‘solutions’ only goes to show how far the new ’entitlement culture’ on Wall Street and in the City of London, where everybody now feels entitled to cheap credit and ongoing asset-boosting policy programs as the universal cure-all, has affected economic thinking. The speculating classes are beginning to feel generous: “Hey, this free cash is great. Let’s extend it to everybody.”

Would a deflationary correction be better?

Back to our cost-benefit analysis. The defenders of the present policy will argue that without it GDP in the major economies would have dropped more, that asset prices and lending would be more depressed, and that we might even be in the middle of some dreadful debt deflation. Maybe so. But to the extent that the present GDP readings are the result of central bank pump priming and not the result of renewed growth momentum, they are simply artificial and thus ultimately unsustainable. In fact, the mere suspicion that this might be so must undoubtedly depress optimism and thus the willingness to engage in the economy and put capital at risk. Nobody knows any longer what the real state of the economy is.

While the unemployed Spanish youth may not benefit – or only very marginally so – from record high German stock prices and their own government’s renewed ability to borrow yet more and yet more cheaply – they may in fact ultimately benefit from a deflationary clear-out that would cause prices on many everyday items to drop. Deflation is not such a bad thing if you have to live on your savings or a modest, nominally fixed payment stream. Additionally, reshuffling the economy’s deck of cards could also offer opportunities. Tearing down the old structures and allowing the market to price things honestly again, according to real risks and truly available savings, may at first cause some shock but ultimately bring new possibilities. The present monetary policy is inherently conservative. It bails out those who got it wrong in the recent crisis at the expense of those who didn’t even participate in the last boom. Some Schumpeterian creative destruction is urgently needed.

I am not advocating deflation or economic cleansing for the sake of deflation and contraction, or out of some sense of economic sadism, or even out of moral considerations of any kind. However, it strikes me that what ails the economy is not a lack of money or lack of a powerful ‘kick-starting’ stimulant, and it may not suffer from unduly high borrowing costs either. Wherever borrowing costs are still high in this environment of ‘all-in’ central bank accommodation they may be high for a reason, maybe even a good one. What ails the economy are the structural impediments that are well established and that had been long in the making, such as inflexible labor markets with their permanently enshrined high unit labor costs and excessive regulation that have always protected current job-holders at the expense of those out of work or entering the labor market. Overbearing welfare systems, high tax rates and outsized public sectors have long held back major economies. Easy money that, for some time, enabled high public sector borrowing and spending, and facilitated local property booms, helped cover up these structural rigidities. Now these issues simply come to the fore again. New rounds of easy money will not make these problems disappear but only create a new illusion of sustainability.

I haven’t even touched upon the growing risk that never-ending monetary accommodation will end in inflation and monetary chaos but it is apparent already that this policy has no convincing claim on rationality. Nevertheless, it is almost certain that it will be continued.

This will end badly.

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topspinslicer's picture

Yes it is in two places...a. in a slave nation b. Superman comics with a Bizzaro issue

Radical Marijuana's picture

Quite so, topspinslicer!

Monetary policies based on the runaway triumphant fraud of being able to make money out of nothing, as debts, while governments force everyone else to accept that being done by private banks is RATIONAL from the perspective of sheering the Sheeple, until they have been exhaustively fleeced, whereupon most of them will be slaughtered off.

These polices are NOT "rational" from the perspective of the vast majority of the Zombie Sheeple, who were being fleeced, and set up to be mass murdered. However, the overwhelming vast majority of people behave like political idiots, which was the result of the long history of triumphantly enforcing lies with violence, making those doing that become more wealthy and powerful, while everyone else was conditioned to accept their debt slavery situation, and adapt to make the best of that reality within their own little lives.

The monetary system is the result of the application of the methods of organized crime, in order to take over the powers of governments, so that private banks could legally counterfeit the public money supply, that everyone else would be forced to use by taxation and legal tender laws. Ultimately, money is backed by murder. However, since the monetary system is fundamentally fraudulent, and its structure automatically drives the debt slavery numbers to become debt insanity numbers, the eventual ways that the fleecing of the Sheeple devolves must become more genocidal wars, along with democidal martial law. Since the debt slavery is backed up by wars based on deceits, and since the debt slavery structure automatically runs away to become debt insanity, and since the debt controls are backed up by the death controls, this overall system is headed towards death insanities, in the form of the majority of the people who are treated like Sheep, and who behave like Sheep, being mass murdered.

That is probably not a rational thing to plan on doing, after the development of weapons of mass destruction, however the basic structure of Neolithic Civilization is a social pyramid system which has no other ways to respond to real problems. Since the established systems are based on a few keeping the many ignorant and afraid, so that the many can be controlled and exploited, there are no better solutions within that system. The only "solutions" to the current problems are to continue to fleece the Sheeple to exhaustion, and then slaughter most of them off. That is the basis of the issue of the apparent "rationality" or "irrationality" of the present monetary policies, since those fit within the long history which made the currently combined money/murder systems.

Thus, as you said, topspinslicer, the current monetary polices are "rational" within a slave nation, which is planning on killing off most of its slaves, which appear to no longer be useful enough.

And, topspinslicer, I also agree with your second point, although that brings up some of the most profound points in the philosophy of science! We do live in a Bizarro Mirror World, where everything appears backwards and distorted, while the established systems are based on attempting to make sure that the vast majority of people do not understand the basic principles of philosophy nor any genuine spirituality. The ruling classes, and those who work for the ruling classes, appear to too much also believe in their own bullshit, while the vast majority of the people they rule over surely were too successfully brainwashed to believe in the biggest bullies' bullshit.

The ultimate manifestation of that Bizarro Mirror World was an arbitrary minus sign was inserted into the entropy equations, which are found throughout thermodynamics as well as information theory. Thus, although human beings and their civilizations should be  primarily understood as energy systems, the ways that our dominant systems are actually understood tend to be totally backwards, in every possible way, and thus, it is almost impossible to exaggerate the degree to which we ARE living in a Bizarro Mirror World.

In conclusion, topspinslicer, I agree that your one sentence correctly identified the ways that our present monetary system can be seen to be "rational" which are FIRST that it actually operates within the context of a slave nation, in which the monetary system is simply a sophisticated system of social slavery, and SECOND, that every way that our society explains itself manifests in a Bizarro Mirror World, where everything is understood in as profoundly backward ways as is possible.

Of course, as that article concluded: "This will end badly."

The overwhelming majority of We the People DO behave like Zombie Sheeple! There are no reasonable grounds to believe that the established systems of debt slavery, backed by wars based on deceits, are going to be changed, other than through their own madness destroying themselves ... in ways which destroy most of the people and life on the planet at the same time.

cosmictrainwreck's picture

"rational"?? ROFL.... WTF dat got to do with it? On the other hand, given motives and agendas, everything going on is completely rational

bank guy in Brussels's picture

The author of this article, Detlev Schlichter, is an absolute idiot

On his website, Schlichter advocates that ... all the countries of Southern Europe, where the children are starting to go hungry under their traitorous quisling governments ...should stay in and KEEP THE EURO !

Schlichter foolishly tries to denounce Ambrose Evans-Pritchard, one of the best and severest critics of the euro, and one of the best financial journalists out there on the European crisis.

Schlichter favours confiscating customer and small business bank deposits like in Cyprus, what a guy.

Schlichter also calls bitcoin 'a work of genius', ha !

This is the kind of 'financial wisdom' that J. P Morgan veteran Detlev Schlichter has to offer, as he pumps for the criminally tragic and murderous euro:

« ... staying in a widely shared common currency does indeed have many benefits ... The idea that numerous countries – even countries with very diverse economic characteristics – should share the same money is entirely sensible and highly recommendable ... the idea of many countries sharing the same currency is a good one. No question. »

What a fool and a tool ... there are hardly any morons out there anymore, pumping for the euro like this

Tango in the Blight's picture

He also said there was no measurable inflation when he was on the Keiser Report a while back.

jon dough's picture

If an egg falls on a rock...
Too bad for the egg.

If a rock falls on an egg...
Too bad for the egg.

Faith Petric

suicidalpsychologist's picture

If you are rich, you ll survive.

If you are poor, too bad for you.

Skin666's picture

Evans-Pritchard thinks money was invented be the state, and that the Industrial Revolution happened because of fractional reserve banking!

Detlev Schlichter is a far better financial journalist/economist than AEP!

HardAssets's picture

Someone said  (I don't remember who it was, undoubtely many have said it) - - -

"Take what is useful to you, throw out the rest."


P.S. -- IMO many economists restrict themselves to looking at the world in economic terms. Because of this, they would not consider that the EU might have been established as a means to destroy national sovereignty and create an eventual globalist NWO.

One exception to this economist tunnel vision was the genius Murray Rothbard. He actually did considerable research and writing on the banksters and on power elite analysis.  He knew that the vast majority of people were getting screwed over, and who was doing the screwing.


Ghordius's picture

he has some good arguments - and you? Except "AEP is right"?

HardAssets's picture

The Mafia is very rational.

'Economics' (as generally practiced) is smoke & mirrors designed to convince those of the population that think themselves 'smart' , to go along with being ripped off.  They even teach this garbage to college kids.

The non government organized crime gangs havent actually set up schools where they teach their victims to be ripped off and think its normal and 'right'.     Only the govt Mafias have been able to pull off that one.

OpTwoMistic's picture

"Monetary Policy Rational'  Liberal seldoms equals rational.

francis_sawyer's picture

I'm assuming this 'Monetary Policy' question is referring to the lifeless limestone 'Marriner Eccles' building [whose cold STONE MASONRY presides over the "printing or non printing" of paper debt instruments]...


Otherwise, I'm truly confused as to the 'rationality' aspect suggestion [in a 'non~discrimanitory' khaki wearing society]...

HardAssets's picture

The policy is perfectly rational . . . . for protecting the banks, for crashing the global economy, and for creating a new global fascist & feudal Super State from the rubble.

Whats irrational, is thinking that the other side is somehow 'irrational' and just making unintended 'mistakes'.

Benjamin Glutton's picture

missed it by that (.................................................................................................) much.


the purpose of "it" is to bail out deadbeat depositors by inflating worthless bank assets.

Winston Smith 2009's picture

"Is this policy likely to deliver what it is supposed to deliver?"

It's already delivering what this unbelievably skewed financial system is supposed to deliver - the greatest transfer of wealth in history.  $500 BILLION from U.S. savers alone every year for the past five years due to artificially low interest rates and that's just a small part of it.

"And if it does fall short of its official aim"

If by "official aim" you mean what is publicly stated then no.  But that's not the real aim anyway.

"its benefits are almost certainly outweighed by its costs if we list all negative effects of this policy"

Benefits for whom?  The leech Wall Street financial sector that has become nothing more than a gambling casino using other peoples' money or those who are supposed to benefit under the phony "official aim"?

Everyone, please get a clue about the very basis of "our" financial system if you haven't already.  What a scam:

What the Heck is a Bailout?

Gmacks's picture

I'm not worried Paul krugman just wrote an article saying there are no current bubbles being formed. He got a Nobel prize so he must be legit right?

Winston Smith 2009's picture

A perfect example of why all Keynesians are morons.  Their economic theory is fundamentally wrong because they don't even factor in private debt and banking!  This is because they have an unbelievably clueless concept of how banking actually works.  Thus, their models can't even detect bubbles let alone predict when they'll burst.  Just look at the continuously incorrect predictions made by Greenspan and Bernanke on YouTube. 

They are clueless because their economic theory is simplistic, 19th century garbage!  However, it survives because it gives pols and bankers what they want to hear: pols can borrow as much as they want with no negative effect ("deficits don't matter") and bankers can claim that it's in everyone's best interest to become increasingly in debt to them!

Introduction to Minsky Economic Modeling Computer Program

Radical Marijuana's picture

"it survives because it gives pols and bankers what they want to hear" ...

Bullshit is bullshit, but still, it serves the bullies. The best bullshit is the kind that enables the bullies to rob and defraud other people the most.

There are no other sufficient theories within political economy that I am aware of. The only sufficient theories would have to include the human ecology, and therefore, put the death controls at the center of the system, since money is backed by murder. These problems are so extremely difficult to deal with because there are no ways to avoid the death controls as being the core controls to everything else. However, since those who were the best at actually operating the death controls were also the best at being deceitful about that, we have evolved a civilization dominated by the biggest bullies bullshit, wherein the social stories which are the most promoted are the biggest bullshit, which serves the bullies.

However, since the vast majority of people have been brainwashed to believe that bullshit, there are no practical solutions to these problems of a fundamentally fraudulent monetary system. I am not aware of any well-known, established theory of economics which bothers to place itself within the ecological context. I am not aware of any publicly accepted theories which are based on what I consider the most plaintly obvious social fact, which is that money is based on murder, and that money must always be based on murder. Instead, all the theories which are am aware of are based on deliberately denying and ignoring that fundamental fact.

kchrisc's picture

They are NOT morons or incompetent or crazy. They know exactly what they are saying and doing and do not care about the repercussions.

Krugman is a Keynesian court shill for the powers and monied elite--a paid apologist for their maleficence.

He'd say the moon was made of cheese if he felt it furthered their agenda and supported his "career."

He'll get the "dull blade" when the time comes.              hujel

Gringo Viejo's picture

My take....everything.....politically, financially, socially today is intentionally irrational. It serves the globalist agenda.....out of chaos......order...."If you want a picture of the future.....imagine a boot...stomping on a human face.....forever. We control life at all levels Winston."

russwinter's picture

More Clues About What Happened in the April Gold Swoon:

AnAnonymous's picture

FED is doing the right job from an 'american' perspective.

'Americans'have put the world on the path of depletion of resources.

It means that in a future, relatively to any productivity gain, there will be less to buy.

'Americans' cant overcome the environment.

At this point, the emergency for 'americans' is to make sure that they can consume the most of what is left to consume.

The FED policies will ensure that as it allows 'americans' to consume for the price of emitting bits.

Of course, since depletion is harsh to go through, it does not mean happy future for every 'american'

It simply means that 'americans' will monopolize the lion's share of what is left to consume.

Welcome to an 'american' world. It is a cosy place to live, you'll see.

akak's picture

Blah blah blah blah blah blah 'americans' blah blab blah blah blah blah citizenism blah blah blah blah blah blah blobbing-up blah blah blah blah blah blah blah.

Welcome to the Chinese Citizenism world.

Damn, I stepped in it again.

Yen Cross's picture

  I'm in the the mood to rip [Anon] in to an A-Hole AKAK. Lets get-er done. :)

akak's picture

You're too late --- he is 100% pure asshole already.

No room for any more assholism there.

Alas, alas, three sphincters alas, just have to smell the stink.

TheFourthStooge-ing's picture

AnAnonymous - the Chinese citizenism prefect of assholiness.

francis_sawyer's picture

new policy... any referral to BLOBBING UP [of any kind], will be considered racially & religiously discriminatory...

kito's picture

Btw I don't like khakis.... They don't match well with my JEWelry..........

francis_sawyer's picture

lol ~ Is that how it works kito?...


Kinda like the "n" word... You're only allowed to use it if you're a rapper with an album deal & make mega moolah [for your PRODUCERS]?...

TheFourthStooge-ing's picture


Damn, I stepped in it again.

Attention Chinese Citizenism Communautist Party Ministry of Truth (with new Hancock building headquarters in Beijing being constructed):

Please curb your propagandists.

Yen Cross's picture

      Hey, ANON doucheizm! Wake up pig farmer!  "Read and Weep"

China increasing investment across Africa -

akak's picture

It is officially known as "blobbing-up resources", and it is part and package of the monolizing of the overconsumption means that is inherent in Chinese Citizenism.  They are parangongs of it, actually.

AnAnonymous's picture


Are 'americans' trying to deflect on the plight of negroes?

As for many other things, 'americans' are pretty much so far ahead no one compares.

The fact is Africa is already owned by 'american' interests.

The point is that an advance of chinese on this continent withdraw from the business of extorting the weak, farming the poor 'americans' run.

So what? To turn 'american', chinese must behave the 'american' way, there is no other way.

And if the chinese want to get their 'american' badge, they will have to equal the 'american' deeds on the African continent.

A very demanding endeavour. 'Americans' set the bar up.

akak's picture

If you could ever blob-up your insanitation to the point of making a single post without at least three references to the 'americans' who you apparently believe are evil incarnate, I think I would shit my pants.

Alas, alas, square root of nine alas, a Chinese roadside would be bereft of its prize.

sgorem's picture

"Are 'americans' trying to deflect on the plight of negroes?" YOU meant to say "blight" instead of "plight" i'm sure..............

Element's picture

OT:  Hmmm ... someone sending Turkey a blunt message.



May 11, 2013

Third explosion rocks Turkish town, report says

A third explosion rocked the Turkish town of Reyhanli on Saturday, television channel NTV reported, but the incident was unrelated to twin blasts there that killed at least 40 people and injured 100 earlier in the day.


Atomizer's picture

Obamaville Brunch Buffet, low voter information scene…


Banking Book Cooker: Good afternoon proletariat, would you like a slice of white or dark central planning knubbe?



Fuku Ben's picture

Let's see what Dr. Cleckley & Dr. Hare have to say below.

Psychopaths have, "an ability to rationalize their behavior so that it appears warranted, reasonable, and justified. Psychopaths show a stunning lack of concern for the devastating effects their actions have on others. Often they are completely forthright about the matter, calmly stating that they have no sense of guilt, and are not sorry for the pain and destruction they have caused, which is associated with a remarkable ability to rationalize their behavior." - Dr. Cleckley & Dr. Hare combined quotes


Does it fit?



Radical Marijuana's picture

The top carnivores in the human ecology are the men that prey on men. They appear to enjoy playing with their prey. Since their prey have been conditioned to believe in false fundamental dichotomies, which indicate impossible ideals are somehow going to be the solutions to real problems, those impossible ideals always make the opposite happen in the real world.

While the psychopathic and sociopathic aspects of the ruling classes are quite clear, by and large, I never see any of their critics providing ways to achieve any human ecology in a better way, through better systems of death controls. The ruling classes appear to have evolved to not feel much compassion for the people they rob and kill. However, there were selection pressures at work to drive that situation to exist. It is not good enough to denounce the evils of the elites, unless one has a better set of solutions to the chronic political problems. The ruling classes did not create the problems which are inherent to the nature of life. The ruling classes merely developed the most expedient sets of solutions, which benefit them.

The only way to have a different monetary system, which was more rational, would be to have a different murder system, which was more rational. Since the vast majority of people have been conditioned to believe the supreme bullshit that there should not be any murder system at all, the actual result is that we operate the real murder system through the maximum possible deceits, which therefore enables our monetary system to operate through the maximum possible frauds. That is "rational" on different levels, but those are rapidly becoming more irrational, as science and technologies advance everywhere, EXCEPT NOT IN POLITICAL SCIENCE, AND ESPECIALLY NOT IN ECONOMICS!

polo007's picture

According to Bank of America Merrill Lynch:

Easy Fed policy: too much of a good thing

The costs of easy Fed policy

Fed policy is aimed at stimulating economic activity, which involves incentivizing households, businesses and investors to take more risk. Investors have obliged, resulting in low rates, tight credit and mortgage spreads, and new all-time highs for major stock indices. But some worry the Fed is causing a dangerous search for yield that could lead to new asset bubbles and financial instability. Our assessment is that Fed policy has not led to an increase in systemic risk.

Risk-taking is good; systemic risk is bad

This piece provides a guide for monitoring financial stability and the linkages between asset markets, financial institutions and the real economy. We believe the ultimate question is whether the Fed’s policies have increased systemic risk.

This depends on the following, which we address in the note:

- Do market valuations appear overstretched and are there signs of asset
bubbles forming?

- Is there an increase in leverage in the market or an overreliance on short term funding? Would systemically important institutions be at risk of failure?

- How are the beneficiaries of easy credit using the proceeds? Are they using debt to fund risky investments, buy homes they can't afford or go on a consumption spree? Or is issuance going toward improving their balance sheets and lowering their vulnerably to the eventual rise in interest rates?

Risk transfer underway, but systemic concerns muted

We argue that Fed policies have encouraged a transfer of risk from borrowers (indebted households and corporations) to creditors (investors) who are willing to accept lower risk premiums. Increased real money participation in credit markets mitigates the systemic implications of this risk transfer. Corporate and household balance sheets are healthier, thanks in part to easy Fed policy, but signs of increased appetite for leverage in the corporate sector bear close monitoring.

Fed to stay the course

Our survey of financial conditions and systemic risk supports our base case that the Fed will maintain its asset purchase program at the current pace of $85bn/month through March 2014, followed by a 6-8 month tapering period.

QE will limit the upside in yields

The potential for a sizable rise in yields will be limited if the Fed maintains QE well into next year as we expect. We forecast a gradual rise in 10y rates by year-end.

smacker's picture

It's good to see a Detlev Schlichter guest post on ZH.

On current monetary policy of Zirp and has never been clear to me what the *claimed* reasons of these are from a central bank and political point of view. It seems to me that if any central banker (or politician for that matter) is asked to explain the purpose of it, he will at best say it's to kick-start economies, provide support to borrowers and nuture economic recovery & growth etc In other words the same old same old guff that we know has failed, but they would claim things would be far worse without their policies. ho-ho. At worst he will dance on a pinhead and answer some other question altogether.

What he will not do and never do is to admit the more nefarious reasons for it. Because that might start a riot if they admitted the policy implemented a regime whereby one person's mortgage was now being paid for by another person's negative interest rate on his savings. Add to that the likely outcome of higher inflation due to QE and the rise of malinvestment due to Zirp etc etc etc.

AynRandFan's picture

Rational or not, it is permanent.

What politician will be able to resist promoting financial bubbles in the future?

Clinton had his bubble.  George W. Bush had his real estate bubble.  Obama had his monetization bubble.  The next regime will have one too.

Fix It Again Timmy's picture

It's rational for some folks; for others it's class warfare...

news printer's picture
Guest Post: Is Present Monetary Policy Rational?

What a stupido question; of course it is.

kevinearick's picture

Civil Marriage in Civil Society

The technology you are looking at has been around for many decades. The only difference is the increasingly arbitrary user interface, separating you from the means of production, yourself, with misdirection, driven by miniaturization, under capital control, and it has run its course, the fixed cost of which has completely consumed what capital defines as its labor. Capital has circled the wagons accordingly, and is shooting itself. Syria is just a transitional symptomatic focal point, where its divide and conquer oil economy is most irrational.

Unless you want to be the best developer in your chosen field, your best (better) bet is civil marriage, the find ‘em, f- ‘em, and leave ‘em, but not in your own back yard, strategy. Socialism is simple; maximize extraction with minimum input, leveraged by layer. Real labor is always fully invested. The two don’t mix. It’s a quantum battery.

Choose an occupation that matches whatever intellect you have, and marry a female with the property to match your income, to land in the empire event horizon of rewards and penalties you are willing to comply with to maintain your desired position for as long as possible, which will depend upon the class you are born in and how much stupidity you can withstand as you climb the ladder.

Within the empire, females are pretty much locked into their future at birth, regardless of all the fantasies presented by its lottery economy. Males are disposable pieces, rotated to maintain the chosen fantasy, until one can be found to maintain the fantasy for as long as possible. Always have a scapegoat, ready for the occasion of economic downturns, artificial turnover of capital’s labor. The eunuchs that accept their role are positioned to surround the eunuchs that believe they are men.

Civil marriage is quite simple; follow the social rules that exempt you from the laws governing others. All empire complexity comes from layering, built over thousands of years. Just change the name on the shingle after each bankruptcy.

The empire is and always has been a ponzi of ponzis, rotated in and out as needed, which operates on simple calculus – get them before they get you. It pays you to ignore reality first and then to get as many others to do the same in succession. It’s a prison, employing many layers of masters and slaves to provide the necessary rewards and penalties.

Marry, consume, be merry, and vote for more of the same. The only difference between parties is the nature of lies / assumptions / promises. If you can’t live with ‘em and you can’t live without ‘em, choosing the better bad outcome every time, you are in a ‘civil’ society, prisoners dilemma.

There is nothing remotely unique about Bill and Hillary Clinton. They are actors acting for actors, paid with layer upon layer of other people’s debt. Bill Gates and Warren Buffet are sitting on piles of false promises, not cash, and the illusion only works if you train your children by example to participate.

Civil marriage is a mercenary game for monkeys, and there is nothing wrong with being a monkey, dressed as the critter of your choice, if that’s what you want to do. Regardless of event horizon, you will be master to the one below and slave to the one above. It’s just a sh-show; make the best of it.

If you don’t want to be a monkey, examine the false assumptions constraining you. The price of real estate is going to fall, and fall hard, relative to real money released as employment barriers fall, as trade routes are re-organized, explosively if necessary. Labor is the only entity capable of sacrificing the present for the future effectively, sometimes for decades, sometimes for centuries, sometimes for millennia, and sometimes for all of the above, which is why the marriage of Microsoft and Boeing does not work.

Homosexuality, feminism and chauvinism are not paths to the future. A battery is something else all together, which is why the observer is the prisoner, of bias feedback. The middle class of each empire iteration always sees itself in the mirror, assuming it is peering out a window, repeating its behavior and expecting a different outcome.

The zoo critters can’t function beyond the zoo confines of empire rewards and penalties, so they define the zoo as global, and it is in all their interests to ignore all evidence to the contrary. Their world is flat and finite. That’s captive breeding for you.

God sets you up to be prosperous, but you have to define prosperity for yourself, the changing definitions of which provide elastic demand, supply and price. Stable demographic compilation with feedback from nature, not central control, drives price stability.

Decide for yourself, but experience says that the circuit between God, your brain, your body, and nature cannot be interrupted for long without reversion. Central control, whatever you want to call the flavor of agency interruption, does not work and has never worked. It’s just gravity, the return pole. From the perspective of agency, humans are disposable, and the objective is to avoid disposition, while subjecting others. Economic discharge is civil accordingly, until it isn’t.

The rewards and penalties are interlaced and re-enforced by breeding rules, Family (banking) Law.

Winston Smith 2009's picture

All you need to know about how banks and central banks run the world using a very convenient (for them and pols) but very seriously flawed economic theory.  Emphasis in text is mine.  Bold emphasis shows one of the fundamental reasons so many key fragments of Keynesian theory are still taken seriously by those in charge:

Excerpted from:

Henry Hazlitt and the Failure of Keynesian Economics



In 1930 Keynes published A Treatise on Money, a two-volume work that he expected would establish his reputation as the leading monetary theorist of his time. Instead, the book was savaged by reviewers, including many of the most prominent economists in Great Britain and the United States. The most devastating criticisms were made by a young Austrian economist named Friedrich A. Hayek, who in a lengthy two-part review demonstrated the logical confusions and theoretical misunderstandings that ran through the entire work.

For the next five years Keynes devoted his time to devising a new theory for his argument that a free-market economy was inherently unstable and that only the guiding hand of government could assure full employment in the face of the economic disaster being experienced during the Great Depression of the early 1930s. This work finally appeared in February 1936 under the title The General Theory of Employment, Interest, and Money.

Except for some of Keynes’s young protégés at Cambridge University, most of the reviewers of the book were highly critical of many of its theoretical “innovations,” as well as its inflationary prescriptions for unemployment.

Hazlitt also took Keynes to task for advocating increasing government control and direction of investment decision-making. Keynes clearly believed, Hazlitt sarcastically observed, “that there exists a class of people (perhaps economists very much resembling Lord Keynes) who are completely informed, rational, balanced, wise, who have means of knowing at all times exactly how much investment is needed and in exactly what amounts it should be allocated to exactly which industries and projects, and that these managers are above corruption and above any interest in the outcome of the next election.”

If The General Theory had so many fundamental flaws, how did it become, in the words of one of his most enthusiastic followers, “the Keynesian bible”? Hazlitt offered some possible reasons in his introduction to his edited volume, The Critics of Keynesian Economics, which appeared a year after his own book. He suggested that Keynes’s theories rationalized the politics of special-interest groups that desired to reap the benefits of an inflation. Also, while much of The General Theory is written in difficult language, Keynes could dazzle the reader with literary imagery and wit that hid his central logical flaws. Keynes used the “technique of obscure arguments followed by clear and triumphant conclusions,” Hazlitt said. And finally, Hazlitt conjectured that the success of the book may have had a lot to do with its appearing to overthrow the existing orthodoxy in favor of radical and fashionable ideas about social engineering. “But whatever the full explanation of the Keynesian cult,” Hazlitt concluded, “its existence is one of the great intellectual scandals of our age.”

The monolithic domination that Keynesian economics once had over all macroeconomic policy has been broken for more than two decades. While too many of Keynes’s misconceptions still underlie how economists think about inflation, recession, and unemployment, the original and primitive Keynesian thinking has been more or less overthrown.

Radical Marijuana's picture

"... Keynes’s theories rationalized the politics of special-interest groups ..."

BINGO! Of course, the dominant economic "theories" are bullshit, which serve the dominant bullies! Economics is basically organized robbery, justified by organized lies. The oldest and best developed social science was warfare, whose success was based on deceits. The monetary system only exists because it is backed up by the military system, which it pays for, in a reinforcement loop. "The greatest intellectual scandals of our age” are the deliberate refusals to admit what are the most obvious social facts.

These days, where finding out facts can be done as simply as making a series of clicks on various Internet search engines, it is possible for learn a lot more than back when there were only books in libraries, and most libraries did not have the books one may have most wanted to read. ... However, we are still trapped within the established sytems, which are based on backing up dishonesty with violence, and furthermore, there are more profound reasons why we can not make the paradoxes which surround that social situation magically disappear.

The deeper reasons why "economics" continues to be almost totally bullshit are that the only way it could be better done is IF economics was inside of a political science which was actually scientific. However, there is no way to have more genuine social science which does not face the fact that militarism is the supreme ideology, because the oldest and best developed social science was warfare, in which success was based on being the best at deceits. That is the real context which explains why our monetary system appears to be superficially irrational ... It is totally based on frauds, right down to its basic foundations, which are the murder systems based on deceits.

The real world necessarily has evolved systems of debt slavery, backed by wars based on deceits. There are no good solutions which are based on assertions that we should stop that from existing. The only good solutions might be better dynamic equilibria between the different systems of organized lies, operating organized robberies. However, all of the most successful systems of organized lies and robbery are all the biggest countries, corporations, and churches, etc., which are all based, as much as possible, on false fundamental dichotomies, and impossible ideals, which achieve the opposite of what they say, which things are always promoted as their forms of immaculate hypocrisy, by those people within those systems which are the best professional liars, which can serve their established systems.

Attempting to negotiate any better dynamic equibria is practically impossible in the context where those who were the most successful within their established systems did so by being the most extreme possible kinds of hypocritical liars. Obviously, Keynesian economics and its critics, all operate within that overall frame of reference, wherein the relative social dominance with which those different views were promoted actually depended on the degree to which those different systems of organized lies served the achievements of the organized social robberies.

Paradoxically, economic theories become more successful the more fraudulent they are, just as military activities became more successful the better they were at deceits. Those are the deeper paradoxes which political science should admit, and address. However, almost all established political scientists are being paid to be professional liars and hypocrites, to promote the established systems of lies and robberies that they are contexted within.

How, or IF, human beings are going to evolve past the problems of technologies making us trillions of times more powerful, while our civilization continues to be controlled by the same old huge lies, remains to be seen ... At the present time, the prospects do not look so good ...