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El-Erian: Central Banks "Have Materially Damaged Their Standing"

Tyler Durden's picture




 

Authored by Mohamed El-Erian via Project Syndicate,

The “branding” of modern central banking started in the United States in the early 1980’s under then-Federal Reserve Board Chairman Paul Volcker. Facing worrisomely high and debilitating inflation, Volcker declared war against it – and won. In delivering secular disinflation, he did more than change expectations and economic behavior. He also greatly enhanced the Fed’s standing among the general public, in financial markets, and in policy circles.

Volcker’s victory was institutionalized in legislation and practices that granted central banks greater autonomy and, in some cases, formal independence from long-standing political constraints. To many, central banks now stood for reliability and responsible power. Simply put, they could be trusted to do the right thing; and they delivered.

As any corporate executive will tell you, brands can be consequential drivers of behavior. In essence, a brand is a promise; and powerful brands deliver on their promise consistently – be it based on quality, price, or experience. In some cases, consumers have been known to act on the strength of brand alone, even purchasing a product with relatively limited knowledge about it.

Indeed, brands send signals that facilitate the task at hand. In some special cases – think of Apple, Berkshire Hathaway, Facebook, and Google – they have also acted as a significant catalyst for behavioral modification. In the process, they often insert a wedge that essentially disconnects fundamentals from pricing.

Building on Volcker’s success, Western central banks have used their brand to help maintain low and stable inflation. By signaling their intention to contain price pressures, they would alter inflation expectations – and thus essentially convince the public and the government to do the heavy lifting.

In the last few years, however, the threat of inflation has not been an issue. Instead, Western central banks have had to confront market failures, fragmented financial systems, clogged monetary-policy transmission mechanisms, and sluggish growth in output and employment. Facing greater challenges in delivering desired outcomes, they have essentially pushed both policies and their brand power to the limit.

This is apparent in central banks’ aggressive emphasis on communication and forward policy guidance. Both have been used more widely – indeed, taken to extreme levels – to supplement the unconventional expansion of balance sheets in the context of liquidity traps.

Now, corporate executives will also tell you that brand management is a tricky affair. It is particularly hard to maintain or control your brand when popular sentiment overshoots.

This is what happened to Apple’s stock this year. As brilliantly explained by Guy Kawasaki in his book on the company, the brand essentially created “enchantment.” Extrapolating this into a market view that Apple could not only innovate continuously, but also fend off any and all competitors, investors took the company’s share price to dizzying heights.

Elsewhere in California, Facebook found its brand fueling enormous hype for the company’s initial public offering. Encouraged by investor excitement and indications of over-subscription, underwriters hiked the IPO’s price well above what they had first deemed reasonable. Issuing the stock to the public at an inflated price a year ago, the shares initially traded even higher.

In both of these cases, and in many others, brand power did more than lead to price behavior that was disconnected from fundamentals; it also caused a dangerous overshoot, which, when subsequently reversed, damaged the brand.

However powerful, brands cannot divorce pricing from fundamentals entirely and forever. Accordingly, and despite a significant market rally that has taken many individual stocks to record highs, Apple and Facebook currently trade at almost half their record levels. Their dominance and influence are no longer unquestioned.

Western central bankers should spend some time reflecting on these experiences. Some have actively encouraged markets to take the prices of many financial assets to levels no longer warranted by fundamentals. Others have stood by passively. Indeed, it seems that only retiring central bankers, such as Meryvn King of the Bank of England, are willing to raise concerns publicly.

This behavior is understandable. Central bankers are basically hoping that financial-market hype by itself can help pull fundamentals higher. The idea is that price action will trigger both the “wealth effect” and “animal spirits,” thus inducing consumers to spend more and companies to invest in future capacity.

Count me among those who worry about this situation. Far from a world of optimal policy, central bankers have been forced into prolonged reliance on imperfect approaches. From my professional vantage point, I sense a mounting risk of collateral damage and unintended consequences.

Market signals are more distorted, fueling resource misallocations. Investors are piling on more risk at increasingly elevated prices. Fundamentals-based investing is giving way to a frantic search for relative bargains in an increasingly overpriced financial world.

All this will not matter much if central banks live up to their reputation as responsible and powerful institutions that deliver on their economic promises. But if they do not – essentially because they are not getting the required support from politicians and other policymakers – then the downside will involve more than just disappointed outcomes. They will have materially damaged their standing and, consequently, the future effectiveness of their policy stance.

By extending well beyond their comfort zone, today’s central banks face unusual brand-management risks. Their prior ability to deliver on promises and expectations has made today’s financial markets take the forward pricing of the economy to levels that exceed what central bankers alone can reasonably deliver.

The implication is not that central banks should immediately halt their hyper-activism and unconventional measures. It is that they should be much more open about the inherent limitations of their policy effectiveness in current circumstances.

Western central bankers need to become much more vocal and, one hopes, more persuasive in placing pressure on politicians and other policymakers. Otherwise, risking major brand damage, they will end up adding yet another item to an already-overloaded plate of challenges for the next generation.

 

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Tue, 06/04/2013 - 10:13 | 3623364 Richard Chesler
Richard Chesler's picture

That's a mouthful for what can be easily explained with one word: corruption.

Tue, 06/04/2013 - 10:22 | 3623402 slaughterer
slaughterer's picture

NEED ... MORE .. POMO JUICE ... ONLY... UP ... .10% ... AND ... IT ... IS ... TUESDAY:

Tue, 06/04/2013 - 11:18 | 3623573 Herd Redirectio...
Herd Redirection Committee's picture

El-Erian says if CBs don't deliver on their promises (I believe we were promised 'price stability' and 'full employment'): "then the downside will involve more than just disappointed outcomes."

Heads will roll?   What I don't like is that Mo is telling us to read between the line.  He doesn't admit that CBs aren't incompetent, they are following the exact policy that is good for their masters.  There are going to be dire consequences when that fact dawns on the populace.

Tue, 06/04/2013 - 12:01 | 3623686 Enslavethechild...
EnslavethechildrenforBen's picture

Sociopath criminal theifs. Why so nice to them and simply refer to them as manipulators?

Tue, 06/04/2013 - 12:18 | 3623726 machineh
machineh's picture

A branding problem can sometimes be addressed by rebranding.

The Federal Reserve should drop its hokey quasi-governmental name and rebadge itself as BUBBLES 'R US ... with a cartoonish logo of primary-colored spheres.

A branded 'ZIRP credit card' (with no trading commissions on Tuesdays) could be the biggest consumer product rollout in history.

Tue, 06/04/2013 - 13:34 | 3624002 Pinto Currency
Pinto Currency's picture

 

El Arian really means 1) central planning is a failure (not news) and 2) montetarism / trying to create wealth from nothing is a fraud (not news).

People are starting to see it in an un-varnished way for what it really is.  That is the real news.

 

Tue, 06/04/2013 - 11:23 | 3623590 prains
prains's picture

what you have is a no way out slow burn trap, the CB's know this and are arranging the deck chairs in a coordinated fashion with geopolitical masters. When they all have their ducks in a row the trap door < on us > will close quick and hard. The masses will have to be cornered and pacified quickly and brutally so the 1% can gain full control of the herd post reset.

Tue, 06/04/2013 - 12:11 | 3623706 DeadFred
DeadFred's picture

The Tuesday fail will pound a stake through the heart of this rally. Will it be this week? I'm betting an afternoon sticksave today, but it will be soon.

Tue, 06/04/2013 - 10:15 | 3623369 PiltdownMan
PiltdownMan's picture

No kidding. i was on TV on the Libor fixing scandal and mentioned that the Fed manipulates rates and markets daily. The guy got furious and said "It's the Fed's mission to manipulate markets!"

Idiot.

Tue, 06/04/2013 - 10:22 | 3623401 ArkansasAngie
ArkansasAngie's picture

That would indicate a reset is needed.  Their mission isn't to manioulate markets nor bail out shatheads. 

Zirp?

Horse manure

Tue, 06/04/2013 - 10:31 | 3623426 LawsofPhysics
LawsofPhysics's picture

Shitheads indeed.  ZIRP has been so good for eveyone, NIRP is going to be killer.  The capital and resource mis-allocation and mal-investment continues.  Please, the "growth" meme requires growth in expendable eneergy, unfortunate infinite growth in a finite world does not work.  Prepare for war.

Tue, 06/04/2013 - 12:16 | 3623718 DeadFred
DeadFred's picture

When the deer population gets too high there's always a fix. Starvation, disease, wolves or a combination of them will always bring things in check. It sounds like you are betting on wolves.

Tue, 06/04/2013 - 10:23 | 3623403 whatthecurtains
whatthecurtains's picture

"The Fed has artificially sustained markets."   - Dick Fisher, President of the Dallas Federal Reserve bank

http://www.examiner.com/article/fed-admits-that-stock-market-gains-are-t...

Tue, 06/04/2013 - 10:30 | 3623423 slaughterer
slaughterer's picture

Just got an Email from ex-member Robotrader:

 

"Hi guys, you may remember me on ZH for my permabullish and pro-Fed trading perspective.  I have decided to finally realize all of my 4,567% capital gains from my keeping long leveraged positions on my high-beta cult consumer stocks like LULU, and NFLX and retire in a secluded villa overlooking the north coast of Malibu.  Hope you guys are doing well, and if you are in the neighborhood, drop by.  Thank you Helicopter Ben.  Signed, Robotrader."

 

Tue, 06/04/2013 - 10:52 | 3623481 SheepDog-One
SheepDog-One's picture

It's nice that the poor little guy still has his delusions, at least he's still got that goin for him.

Tue, 06/04/2013 - 10:56 | 3623492 orez65
orez65's picture

Dear Robotrader:

Please, don't neglect to keep all of your profits in super safe US Dollars.

Or you may want to keep a large percentage in super safe US Treasuries, I'd suggest 30 year Treasuries.

"In the Fed We Trust".

Tue, 06/04/2013 - 11:05 | 3623532 Vooter
Vooter's picture

This is for Robotrader, in case he's thinking about picking up a pink Cadillac to go with that villa:

http://youtu.be/glSN4qvjt2E

Tue, 06/04/2013 - 10:17 | 3623375 yogibear
yogibear's picture

Get your guns and ammo ready. Here comes the goon squads, DHS.

 

http://www.oregonlive.com/mapes/index.ssf/2013/06/kitzhaber_promotes_county_resc.html

Oregon Governor Demands Tax Hikes and Emergency Powers or Will Call on National Guard to Police Troubled Counties

Gov. John Kitzhaber warned Monday that he could be forced to mobilize the National Guard to 

police financially troubled timber counties if legislators and local officials can't 

agree on a rescue plan to provide basic law enforcement.

Kitzhaber urged lawmakers to pass an unprecedented measure that would allow him -- 

with the approval of legislative leaders and local county commissioners --

 to impose a temporary local income tax in counties that have slashed patrol, 

jail and prosecutorial services. Under House Bill 3453, those local taxes would 

be matched with an equal amount of money from state taxpayers.

Tue, 06/04/2013 - 10:21 | 3623392 Bryan
Bryan's picture

The biggest lie in that statement is the word "temporary".

Tue, 06/04/2013 - 10:17 | 3623378 Hohum
Hohum's picture

We're in the third period of economic history in the USA since 1900. The first was oil consumption rising 6-7% per year until 1970 or so.  Then came the fiat era with total debt rising much faster than GDP.  Now it's the ZIRP/QE era, which may last a while.  What's next? You don't want to know.

Tue, 06/04/2013 - 10:19 | 3623382 fonzannoon
fonzannoon's picture

"Western central banks have used their brand to help Hide rising and unstable inflation. By signaling their intention to suppress price pressures, they would alter inflation optics – and thus essentially convince the public and the taxpayer to do the heavy lifting.

I fixed it for you Muhammed!

Tue, 06/04/2013 - 10:46 | 3623467 Hobbleknee
Hobbleknee's picture

Exactly.  If infaltion was so low, why did they change the way it was calculated, and why is energy, food and housing excluded from core CPI?

Tue, 06/04/2013 - 10:19 | 3623384 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

As long as we have a perpetual debt monetary creation system doesn't matter what the Central Banks do. The end is going to be the same and that is economic destruction of whole countries when the confidence is gone in the currency, the banks only function really is to try to keep that confidence intact but the free spending governments will ultimately undercut any of their actions. Debt free, hard asset backed money with no rehypothecation on the actual money supply is the only solution to rebuild a solid foundation only all levels of the economy. Everything else is just putting off the inevitable. Mathematical fundamentals that are tried and true and proven logically through proofs will not be denied no matter what any expert may say.

Tue, 06/04/2013 - 10:19 | 3623385 Bryan
Bryan's picture

People want their cake and eat it too.  Business cycles are *cycles*... up and down.  You can't expect up up up up all the time.  But that's what the Fed (and the common sheep) want - to our own destruction.

Tue, 06/04/2013 - 10:21 | 3623396 buzzsaw99
buzzsaw99's picture

Pimpco does nothing but underperform and whine lately.

Tue, 06/04/2013 - 10:46 | 3623413 Dr. Engali
Dr. Engali's picture

The fed never ever "beat inflation" and managed inflation expectations lower. Consider the inflation you never saw. For example...Who used to pump your gas and who does it now? Who used to bag your groceries and who does it now? Who used to book your travels and who does it now? The illusion is that the fed managed inflation away. The truth is people took cost measures in their own hands as the dollar's buying power continued to be printed away. The fed has done nothing but butcher the buying power of the FRN. Lying bag of shit.

Tue, 06/04/2013 - 11:37 | 3623630 Herd Redirectio...
Herd Redirection Committee's picture

Hidden inflation of every kind.  Chip bags from 8 oz to 7 oz then 6 oz.  Price, the same.  Inflation 0%.  Or is that 25%?

Sausage at the grocery store is now inedible, haven't even tried in 3 years, after they surreptitiously changed the recipe.  Likely more bread crumbs (or even better, cellulose) and less meat.

Coke was 24 in a flat, now 20. Same price.  So basically, ingredients are being downgraded, esp. high quality, costly ingredients (the meat part of the sausage).  Product sizes are being reduced with prices staying the same (not possible in wholelsale).  And then the 'self-service' measures you discuss.   And on top of that, prices are still going to keep going up!

Tue, 06/04/2013 - 10:28 | 3623418 LawsofPhysics
LawsofPhysics's picture

Quit whining PIMPco

Hey CONgress, Tick fucking tock,

http://www.marketwatch.com/investing/bond/10_year

Tue, 06/04/2013 - 10:35 | 3623429 francis_sawyer
francis_sawyer's picture

Folks ~ It's 'official' now [based on my comment to your 'clownbux' comment on a previous thread]

~~~

Zero Hedge has now jumped the shark of 'PRECRIME THOUGHT POLICE'... My comment regarding the disambiguation of the myriad of alternatives of the term 'clownbux' now, officially, gets your comment deleted on this blog...

Which also got dick cheney's ghost comment deleted as well [just for saying "nice to see you"]...

Tue, 06/04/2013 - 10:48 | 3623447 Dr. Engali
Dr. Engali's picture

What are you talking about Francis? that comment is still there.

 

Edit: I didn't junk you by the way. I'm only curious to see if you got a stearn talking to.

Tue, 06/04/2013 - 11:14 | 3623480 francis_sawyer
francis_sawyer's picture

@Dr. E.

~~~

Nope ~ no stern talking to... But you're correct... MY MISTAKE... LOP made a previous comment with c-bux in it as well which I hadn't seen before [& is what I reacted to]...

Again... My error... My apologies to the 'Tylers'...

Sometimes you're the window... Sometimes you're the bug... [Except if you're a moneyprinter, where you're always the window & the rest of the people are always bugs]...

Tue, 06/04/2013 - 11:40 | 3623640 Herd Redirectio...
Herd Redirection Committee's picture

ZH can't be destroyed.  We've all subconsciously agreed to join Fight Club 2.0 (what the contingency ZH will be called).

Tue, 06/04/2013 - 10:29 | 3623419 AON
AON's picture

Hey El Erian!  Fuck you!  Fed policies are destroying the world you wall street whore. You pussy. And you want to use your professorial marketing language and talk about how they are "damaging their brand."

How about having their heads on a fucking stick and yours too you chickshit?

 

Tue, 06/04/2013 - 10:32 | 3623427 buzzsaw99
buzzsaw99's picture

Preach it AON!

Tue, 06/04/2013 - 10:52 | 3623484 AON
AON's picture

i've had enough of this shit buzzsaw

Tue, 06/04/2013 - 12:21 | 3623741 machineh
machineh's picture

Learn not to burn, kids! [just kidding]

Tue, 06/04/2013 - 10:33 | 3623430 q99x2
q99x2's picture

Next Generation is going to be known as the Banker Hangers. They'll be ok.

Tue, 06/04/2013 - 10:45 | 3623461 yogibear
yogibear's picture

Go long boiled rope. Just like what happened in the 1900s.

Tue, 06/04/2013 - 10:34 | 3623433 sangell
sangell's picture

Hmmm both CEO's of PIMCO going after the Chairsatan today.

 

Tue, 06/04/2013 - 10:38 | 3623438 williambanzai7
williambanzai7's picture

The phenomena we are witnessing in the financial markets today is something that has been recently written about, but is nothing new: wilfull ignorance or reckless indifference.

The end result will also be nothing new. But the principal culprits will once again claim they never saw it coming.

Last time around they got a mulligan. This time they will get a three iron to the head.

Tue, 06/04/2013 - 10:41 | 3623448 buzzsaw99
buzzsaw99's picture

it's different this time

it's not a pump and dump this time

trust us

 

Tue, 06/04/2013 - 10:50 | 3623476 SheepDog-One
SheepDog-One's picture

Oh yea....they all promised they learned their lesson last time with derivatives and all that.

Tue, 06/04/2013 - 10:46 | 3623465 Bastiat
Bastiat's picture

What's the next step when a fiat currency's "brand" is damaged?  Diversification, then dumping, accelerating velocity, hyperinflation.  You can try to hide the beginning stages by selling your (or somebody's) gold, or leveraged imaginary gold, but demands for physical delivery put a limit on that game.  

Tue, 06/04/2013 - 10:46 | 3623466 AynRandFan
AynRandFan's picture

El-Erian's call for federal legislative and policy support means . . . more spending?  It is absurd to think anyone could count on politicians to take responsible action such as cutting unnecessary spending.  So, I must assume El-Erian is suggesting that the Obamites be given free reign to spend our way to utopia.

Tue, 06/04/2013 - 10:55 | 3623488 Turin Turambar
Turin Turambar's picture

"However powerful, brands cannot divorce pricing from fundamentals entirely and forever."

Fiat dollar anyone?

Tue, 06/04/2013 - 10:56 | 3623489 Turin Turambar
Turin Turambar's picture

.

Tue, 06/04/2013 - 10:59 | 3623507 Faust100F
Faust100F's picture

I think the author, should understand what his "new normal" means . . . this fiasco has been going on for almost six years and each day Bomber Ben keeps the printing presses running . . . this is the new normal. 

We are the muppets that are being manipulated and now most of the sheeple seem to believe the worst is over . . . it has yet to begin.

The only protection anyone can muster in a time like this (pre great, great depression), is to liquidate debt, and put cash into "hard assets" not pieces of paper which can be manipulated by flash traders. 

Find a piece of land and work on preparing it so that you can survive what is coming to our world there.

I am a farmer, I never owned a stock, I always believed that I could lose my money as well as those who farm the muppets can.  I only own farmland and I lived through and lost land in the farm depression of the 80's when Volker raised interest rates to 17%.

That lost land was replaced during the land value crash that followed in the late 80's.  Today, many call farmers in Iowa lucky, where a mere 80 acres will now make one a millionaire, but most of us paid a harsh price and learned a life long lesson regarding "leverage" during that era  when we were Volkerized.

So be good to yourself, most will survive this attempt by our government to make peons out of us.   But put your money in something that will still be there when the dust clears from the hard times that lay ahead.

 Many Americans are suffering right now, and it is just beginning.  Adios Amigos. John

 

Tue, 06/04/2013 - 11:12 | 3623554 RSloane
RSloane's picture

The phrase "new normal' was coined by El-Erian on, you guessed it, CNBC.

Tue, 06/04/2013 - 11:35 | 3623622 LawsofPhysics
LawsofPhysics's picture

Ditto.  Good luck John.  May our tribes meet on the other side of all this.

Tue, 06/04/2013 - 12:01 | 3623685 WezTheJuic
WezTheJuic's picture

Well stated Faust.

 

The Basics in life are still a play on the basics in the financials.  (Which does go both ways.)

 

These plays on the currency/currencies are yes, meant to create another long term effect.  AND yet, that portion has not taken hold.  Why?  That is up to you to answer.

 

Cheers John,

 

Pens,

Tue, 06/04/2013 - 12:06 | 3623694 JR
JR's picture

To face each season, to put in a crop when the bank is your partner is to lose it all when the bank deliberately decides to close you out and you can find no other bank that will refinance your loan. It was the fate of hundreds of thousands of diligent farmers wiped out and silenced.

My family is well acquainted with many of them – many who never got back their land, including that they had inherited.

Savers and retirees are the latest victims of this bank manipulation and the irony is, they had saved from their labor and it was not debt.

Tue, 06/04/2013 - 11:01 | 3623511 orez65
orez65's picture

"... central banks ... they should be much more open about the inherent limitations of their policy effectiveness in current circumstances."

Central bank policies can be explained simply as: FRAUD.

Printing money out of thin air is THEFT.

Dear Mr. El-Erian:

Fuck you, you should be denouncing central banks not endorsing their fraud.

Tue, 06/04/2013 - 13:36 | 3624008 Zero Govt
Zero Govt's picture

to be fair he is saying in a roundabout way they are shit

Tue, 06/04/2013 - 11:02 | 3623518 JJ McApe
JJ McApe's picture

Fed speakers due = knock down gold, manipulation in our banana republic. Markets are hanging by a thread, one wrong word out of one of these puppet masters and we could get a flash crash which proves beyond a doubt there is no real value in these markets only hot money.

Tue, 06/04/2013 - 11:06 | 3623534 JR
JR's picture

Building on Volcker’s success, Western central banks have used their brand to help maintain low and stable inflation. – El-Erian

What could an evil cancer on America’s economic system do about covering up its image? It could use its secret weapon: the false icon Paul Volcker who is not at all what he has been fashioned to be by the financial media.

 Paul Volcker is Chairman Emeritus of the Group of Thirty (G30), an international body of leading financiers and academics whose interests center on “foreign exchange, currency, international capital markets, international financial institutions, central banks and supervision of financial services and markets, and macroeconomic issues such as product and labor markets.” Current chair is Jean-Claude Trichet.

The Group of Thirty is a non-governmental body that acts as the government -  a banker pool from which the elite draw to control world finance.

In a May 26, 2008 article entitled “Fed's Geithner Says World Economy Is Coping With U.S. Slowdown,” Bloomberg referred to this Group of Thirty at its Jerusalem hosted event as the G-30, “a private group mainly of current and former central bankers…”

In a related article on May 26, “Group of 30: the Conclave of Financial 'Geniuses' Meet,” Elaine Meinel Supkis, wrote: “The US is leaderless right now. But the international ruling elites, the international brain pool, the international noogies who paw all over each other at Davos or Paris or New York, these guys will slog onwards without any US leadership. They are what they are: the Real Rulers…”

Paul Volcker was the major player in moving the USD off the gold standard under Nixon.

Former Fed Chair Volcker served not only “under” Nixon, but Carter and Reagan and Obama as well and is a big proponent of a single global currency.

Volcker was the prime mover at the Treasury in establishing Bretton Woods II. Not to mention the role Volcker played in moving the USD off the gold standard. Volcker and his buddies at the G30 (e.g. see G-30 manual on derivatives published in 1993) have not only known about but have methodically planned the global monetary regime that was instituted in response to the GFC caused by the derivatives time bomb.

Wikipedia corroborates: “From 1969 to 1974, Volcker served as under-secretary of the Treasury for international monetary affairs. He played an important role in the decisions leading to the U.S. suspension of gold convertibility in 1971... advocating the pursuit of an international solution to monetary problems. 

The New York Times, on the appointment of Volcker as Carter’s chairman of the Federal Reserve Board, wrote on July 26, 1979, that Volcker learned “the business” from Robert Roosa, a partner in Brown Brothers Harriman, and that Volcker has been part of the Roosa Brain Trust at the Federal Reserve Bank of New York, and, later, at the treasury in the Kennedy administration: “David Rockefeller, the chairman of Chase (now JPMorgan Chase), and Mr. Roosa were strong influences in the Mr. Carter decision to name Mr. Volcker for the Reserve Board chairmanship.”  Robert Roosa was Carter’s secretary of the Treasury, and represented not only Brown Brothers Harriman of the London Connection, but the Trilateral Commission, the Council on Foreign Relations, the Bilderbergers, and the Royal Economic Institute.  He also was a trustee of the Rockefeller Foundation and a director of Texaco and American Express companies.

The Times further noted that the Dow market rose on Volcker’s nomination, registering the best gains in three weeks for a rise of 9.73 points and that the dollar rose sharply on foreign exchange at home and abroad.

On December 2, 1981, the Times mentioned that when Open Market Committee meetings are held, Anthony Solomon as NY Fed president, and Volcker as chairman of the Board of  Governors sit together at the head of the table and relay instructions which they have received from abroad.

Rockefeller and Roosa also were highly influential in Carter’s nomination as the presidential candidate of the Democrat Party.

Tue, 06/04/2013 - 11:23 | 3623591 paint it red ca...
paint it red call it hell's picture

And, let me add, El Erian is out of the IMF and David Walker former United States Comptroller General is connected with the Blackstone Group through the Peterson Foundation.

So, what does it mean? It means that those that brought us our financial problems are providing mouthpieces bearing the solutions to the mess that was created in order to bring us the solutions they will provide.

Perhaps we may be begging for what else they wrought before this mess is over. Be very suspicious.

Tue, 06/04/2013 - 11:10 | 3623544 SmallerGovNow2
SmallerGovNow2's picture

"central bankers need to become much more vocal and, one hopes, more persuasive in placing pressure on politicians and other policymakers."

Little late for this isn't it?  And for damaging their "brand"?  Damage is already done.  Read the bloggers on this site.  You think any of us have any respect what-so-ever for central bankers? 

Tue, 06/04/2013 - 11:28 | 3623606 JR
JR's picture

In the last few years, however, the threat of inflation has not been an issue. – El-Erian

The origin of this sentence springs from the origin of the greatest theft in history, the lie that has taken the labor of western civilization and made it the foundation of an international-banker ruling class. There has never been stable inflation for decades; it has been the paper currency that has fooled and cheated generations of Americans into believing they must just keep working and slaving to keep the wolf from the door, and always, the wolf was sapping every ounce of excess they produced. The wolf gained access to the house in 1913.

1939 Cost of Living*

LIVING

New House - $3,850.00

Average Income - $1,729.00 per year

New Car - $700.00

Tuition to Harvard University - $420.00 per year

Movie Ticket – 25 cents each

Gasoline – 10 cents per gallon

First-Class Postage Stamp – 3 cents each.

FOOD

Granulated Sugar – 59 cents for 10 pounds

Vitamin D Milk – 49 cents per gallon

Ground Coffee – 40 cents per pound

Bacon – 35 cents per pound

Eggs – 19 cents per dozen

Fresh Ground Hamburger – 14 cents per pound

Fresh Baked Bread – 8 cents per loaf.

Source: SeekPublishing

Tue, 06/04/2013 - 11:35 | 3623623 loonyleft
loonyleft's picture

Simply put, they could be trusted to do the right thing; and they delivered.

 

umm.... no they couldn't and no they didn't. Or maybe I should say from who's perspective? 

Tue, 06/04/2013 - 12:06 | 3623697 stlouistrader
stlouistrader's picture

man just when i was hoping faber would cave and say he's getting nuetral, he comesback on cnbc and says the market is "vulnerable"...looks like I have to stay long.  Thank God there isnt an article on ZH this morning regarding his interview.  ZH has finally given up on this clown.  Now if they would just get Biderman off the blog.  I would love to know the names of the institutions that pay Biderman and what their track record has been.  

Tue, 06/04/2013 - 12:07 | 3623702 OneTinSoldier66
OneTinSoldier66's picture

If there are limits to what Central Banks can do these days someone would have to "show me" what the limit is, because I haven't seen it.

Tue, 06/04/2013 - 13:06 | 3623889 Bastiat
Bastiat's picture

The dollar price of physical gold will show you the limit, as will the dollar prices of most things, in time.

Tue, 06/04/2013 - 13:33 | 3623998 Zero Govt
Zero Govt's picture

El-Erian: Central Banks "Have Materially Damaged Their Standing"

I think Mohammed is basically saying central bwankers are the village idiots of the decision making process... any decision ...even their choice of ties in the morning are f'n drab

tell us something we don't know bud

Tue, 06/04/2013 - 15:11 | 3624279 much obliged
much obliged's picture
Brand managing anything "central" eventually gets to be the end itself rather than the means to an end. As is "globalization", centralization is the problem itself, is unwieldy, lacks transparency and ergo inherently prone to corruption. Another central, "federal" has too much taxing power, infringes financially in State affairs such as health and education. "Common currencies" such as the Euro can't take into consideration disparities in lifestyle wrought by differing climates, the work friendly mild summers and winters of Germany and northern France compared to stiflingly hot summers of Greece and Italy.
Tue, 06/04/2013 - 19:44 | 3624900 Kilo_Oscar_Tango
Kilo_Oscar_Tango's picture

I like Mo.  He seems very genuine.  What I don't like is how he attempts to sell CB's as just another fly-by-night consumer electronic or social networking company.  The reality is if brands fail, there are other brands to step in and pick up market share.  The fundamental problem with CB's and all TBTF institutions is their failures have wide spread impact when gone wrong.  There is not another CB to step up to the plate after Helicopter Ben gets done destroying this country.

At least he is admitting what all ZH'ers have been screaming about for years now...valuations do not match up with fundamentals.

20% correction coming this summer.  More aggressive fed coming this Fall.

Tue, 06/04/2013 - 21:17 | 3625106 exartizo
exartizo's picture

The Fed lost all credibility in my book when The Bernank said:

"We are trying to prevent Unnecessary Foreclosures"

By definition, in The Real World, there is no such thing as an "Unnecessary Foreclosure".

Since he said that, of course, gross and massive Market Distortions have now become commonplace.

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