Guest Post: Forward Guidance? – Nonsense! Central Bankers Have No Choice

Tyler Durden's picture

Submitted by Detlev Schlichter via,

After two decades of serial bubble-blowing, the world’s central bankers have maneuvered themselves into a corner. They created a monster in the form of an unbalanced global economy and a bloated financial system, laden with debt, addicted to cheap money, and in need of constantly rising asset prices. Now the monster is in charge and the central bankers dare not stop feeding it.

The US Fed did, of course, make some noises to the effect that the flow of cheap money may at some point slow and then even stop. How credible these projections really are is far from certain. Markets seem to take them quite seriously indeed, but the more they sell off in response – and in particular, the more yields and risk premiums rise – the more difficult it will be for the Fed to follow through. – And by the way, if the jobless rate does fall to 6.7 percent, or to whatever magic number Ben Bernanke, in his unlimited wisdom, has ascertained as being safe for a policy ‘exit’, and if he then indeed does withdraw the punchbowl– will the unemployment rate then rise again? – We may have to deal with that question some other time. The focus today is the ECB and the Bank of England.

Policy paralysis is the new strategy

Both central banks had their monthly policy meetings yesterday and did – nothing. Although, when you read the papers you get the impression they did quite a lot. They seem to have unveiled some powerful new policy tool: forward guidance.

Both stated that they were committed to leaving policy rates at ultra-low levels for very long indeed. The ECB added that it might even lower rates further. The Bank of England additionally chided the UK bond market for paying too much attention to what Bernanke says, and for evidently not supporting the national recovery effort enough. This was, of course, an attempt by both central banks to distance themselves from the Fed’s loose talk of potentially turning off the monetary spigot. There is nothing surprising about this. Both central banks are standing with the back to the wall.

Let’s face the facts: Years of relentless monetary doping have not solved anything – neither economy is anywhere near the self-sustaining recovery that Keynesian and Monetarist interventionists have promised us we would get in turn for all these monetary manipulations. For years, these central banks have been stubbornly sticking to the same game plan: inject unlimited new bank reserves into the banks and keep buying (or funding) bank asset so that the banks don’t fall over, and the credit house of cards doesn’t crumble, and the state and the banks can continue to fund themselves on the cheap. As the self-sustaining recovery remains elusive, they have no exit strategy. There is no way out.

Yesterday, the ECB and the Bank of England publicly admitted that they were boxed in and would remain so for the foreseeable future. They have no policy options, there is no (real) recovery, so they will keep rates super low, maybe even cut them again. Only in our bizarre modern world of relentless Orwellian Newspeak can this position of utter defeat be dressed up as the new policy program of ‘forward guidance’. To admit that you can’t move, to admit that your policy has not worked and is unlikely to work anytime soon – otherwise you would have to be ready for withdrawal of the stimulus, right? – is now presented as a skilful steering of market expectations and massaging of market psychology.

This was the first policy meeting under new Bank of England governor Mark Carney, the ‘most talented central banker of his generation’ to some, the most overpaid bureaucrat in the world to others. But credit where credit is due. Carney is a marketing genius. Not only when it comes to marketing himself, but also when it comes to selling policy paralysis as strategy. Never before has the phrase “What can we do? We can only stick to what we have done for years.”, so effectively been presented as at the BoE’s press conference yesterday. It is now called ‘guidance’, and it evidently requires a specific skill-set. The Wall Street Journal even described Mr. Carney as “one of the pioneers of guidance”, and I wonder if the chaps at the Journal kept a straight face.

Foreign Exchange markets and gold

The notion of policy divergence between the Fed and the other central banks has reawoken the foreign exchange markets. The dollar is rallying, and I think the speculator-community may try and run with this theme for a while. Divergence is naturally something that fx markets love but in this crisis it has never lived up to its expectations. Among the major nations, the similarities in terms of economic problems and in terms of policy responses are simply much greater than the differences. These countries are all pretty much in the same hole. This is a global crisis and I believe it is a global fiat money crisis. I cannot see that one of these paper monies is fundamentally better than the others. It is my view that any notion of divergence in economic performance and in policy will not last and market trends based on these notions will be short lived. I remain skeptical as to whether the Fed can really ‘exit’. (Again, the Fed SHOULD exit, in my view, as should the other central banks, but then again the Fed never shares my views.)

The idea of a Fed-exit is still a major problem for gold. I readily admit that I am baffled by what has happened here – and what is still happening. ‘Forward guidance’ from the Bank of England and the ECB has not helped gold, it has only strengthened the dollar versus pound and euro. The dollar is what matters. The dollar is the world’s leading fiat currency and gold its main opponent. It does not seem to matter much what the other paper money central banks do. As long as the notion of Fed-‘exit’ drives markets, and the threat of dollar-debasement seems to fade, gold continues to struggle. For obvious reasons, I do not believe this will last and I remain a gold bull. There could, however, be more pain in store first.

In the meantime, the debasement of paper money continues.

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miker's picture

Excellent, balanced summary of where things are across the developed fiat currencies.  I think the author and others are correct in concluding that these institutions are going to become more and more irrelevant.  Much like the rudderless governments as well.

People can sell gold and gold can be slammed down at the direction of the Central Banks; however, one would be stupid to not at least buy a little as the price drops.  Certainly don't bet the ranch, but 10-15% of your assets for insurance against something nobody wishes will happen.

Tinky's picture

Bernanke is "puzzled", Detlev is "baffled", and my grandmother is verklempt

Any questions?

BadDog's picture

"I am baffled by what has happened here" translated: I'm clueless that the whole corrupt system is run by criminal banksters.

tictawk's picture

Long rates which are controlled by the market are going up.
The Fed has a problem given that many banks are loaded to the gills with this debt. Bonds are The "promise to deliver" currency. Bonds are dropping sharply i.e. the risk in those promises is rising. Hence the dollar is rising too.

All Risk No Reward's picture

If by "market" you mean "Biggest Finance Capital mafia" that uses central banks as their debt money Trojan Horse mechanism, then I agree with you.

Central Banks Sell Record American Debt

Marginal buying and selling drives markets.  Biggest Finance Capital, in conjunction with their mega corporate fronts and their central bank corporate fronts, can, AND DO, marginally control the direction of rates.

In addition, they control the media and can whip up the direction of public opinion that serves their purpose as well.

Stuck on Zero's picture

Gee.  The poor baffled bankers have maneuvered themselves into a positions as the wealthiest and most powerful group of people on earth.  What a conundrum.


All Risk No Reward's picture

I know - are these people who think the "power of money" that is "gravely to be regarded" (Eisenhower, fairwell speech) is dumb and ignorant really that misguided?

I wish I could be dumb enough to be sitting on trillions in assets, sitting above the law and sitting on a switch that forces everyone else to pay for my debts.

How does one get that dumb and stupid, anyway?

People have, apparently, never read Art of War where appearing dumb, stupid and docile is a key tactic to conquer your enemy.

Himins's picture

Q: If you are so smart, why aren't you rich?
A: You are rich, why aren't you smart? 

Redneck Hippy's picture

When the dollar goes up, gold goes down.  How baffling is that?  Gold is a commodity priced in dollars.

Ancona's picture

Once a thing gets so big that it's master can no longer control it, it will never stop. Looks like SkyNet has become self aware.

Whiner's picture

Feed me, Seymore!
Little Shop of Horrors Trailer - IMDb

Bastiat's picture



"I readily admit that I am baffled by what has happened here – and what is still happening. ‘Forward guidance’ from the Bank of England and the ECB has not helped gold,"


It's only baffling if you believe the precious metals markets are real markets.  LME delivery: 100 days?  And that's the "cash" market?

All Risk No Reward's picture

You are not fully understanding how the world works.  The central banksters blew the bubble on purpose.  Bubble / bust operations are how they "magically" turn their debt money "fiat" into real homes, land, businesses, farms, toll streets, energy companies water companies, national parks, etc.

It is elementary.

They knew they were breaking Section 2A of the Federal Reserve Act (the mandate IS NOT to maintain low employment and stable prices, those are the expected results of following the SINGULAR MANDATE!) when they took credit and monetary aggregates exponential to GDP (actualized potential production):

Weapons of Mass Debt

Of course, there are no penalties for oligarch "laws" - they are more accurate deemed propaganda for the naive plebians.

The bust portion of this cycle is every bit as important a part of the bubble / bust, societal asset stripping operation as the bubble!

The international banking cartel is orchestrating the interest rate spike as the organic growth of the American economy is contracting $500 billion a year and dropping rapidly!

Central Banks Sell Record American Debt

The third chart down is the one the one that depicts the $500 billion per quarter organic contraction and the rapid quarterly increases in that contraction (worse than going into 2008!)

Fed Z1: A SEVERE Storm Warning

The Fed won't tell you they are stabbing you in the back and twisting to hit every major organ they can.  Of course your economic assassine will blame something else as it does its dirty work.

We, as a society, have to stop being a perpetual Charlie Brown, ever kicking that field goal and having the ball pulled away...  but never quite able to figure our being played for a rube.

The "power of money" that is "gravely to be regarded" (Eisenhower's own words as quoted from his farewell speech - read it!) controls the mega banks and their debt money tyranny Trojan Horse Federal Reserve System.

The Fed is independent of the government, but it is not independent of the international banking cartel's private interests.

The people who run JP Morgan also control the Fed.  I believe Jamie Dimon, CEO of JP Morgan, sits on the board of the Fed. 

Got incestuous?

Why, might you ask yourself, woudl the power of money lend 30 year mortgages for sub 4% ahead of bout of serious monetary inflation?  The current price inflation is primarily due to speculation in commodities markets by mega-banks that are stealing trillions from the ignorant proletariat and then using it to gamble up the price of commodities.  This is nothing new...  The only thing new is they now pass off their losses to the ignorant "consumer" instead of the corporate bank structure: \

Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!
~From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson (February 1834), according to Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels - online PDF

There is nothing new under the sun - but guess whose mug those Vipers put on the $20 bill?

As for WHO tried to assassinate Andrew Jackson, I will defer to Andrew Andrew Jackson's own opinion...

The bank, Mr. Van Buren, is trying to kill me, but I will kill it.
~ Said to Martin Van Buren (8 July 1832) and quoted in The Autobiography of Martin Van Buren, published in Annual Report of the American Historical Association for the Year 1918, vol. II (1920), ed. John Clement Fitzpatrick, ch. XLIII (p. 625)
Referring to the Second Bank of the United States

This view of the central bank as hapless idiots is actual a Sun Tzu Art of War tactic.  Pretend to be weak and dumb so your victim will think they are strong and not sense the imminent danger as you destroy them.

Stop falling for it.  The international banking cartel has used debt money systems, deception and fraud to murder more people in human history than any other group of people - and no other group is even close.  Most of the 30 million starvation deaths fall right at their feet - doing as Hitler did in the ghettos by denying resources and energy to people.  Except it was a small walled ghetto, these are nation state sized international banking cartel ghettos.

Its even worse when you realize that their competition in the mass murder game were almost put into power with their help!

So stop being so gullible.  Mises has some great ideas, but his meme that central bankers are idiots is probably why the central bankers brought Mises to America and funded his work through the Rockefeller Foundation.  The money power doesn't do that unless they deem it is in teir self interest.

Why have they inflated up until now?  Because they are using inflation as the pretext to rip off our nation's financial face.  Would you consider 20% inflation a good tradeoff for stealing $5 trillion from society?

So do they.  The problem is that they can't continue to do that without eventually damaging the monetary wealth they've already stolen.  When the cost benefit of looting the American childlike minded people turns against them, they will stop it, bust the system and use their trillions in debt paper to seize the hard assets of the American people and the world.  They will then use the trillions in money they looted from everyone else to mop up whatever is left.

But that will collapse the economy, you argue.  Of course.  The economy will collapse no matter what.  The question is whether the "money power" that is "gravely to be regarded" will destroy their trillions in monetary wealth in the process of if they try and mop up society's *ss in the process.

If you have to think about their choice for more than an instant then you don't understand the money power.

Even Jesus had to bust out the whip and kick over tables to deal with these criminals.

You also fail to understand they've already sold the establishment gobemouches in society that their front corporations are TBTF&Jail.

They can't fail - GOT THAT?  Real estate falls 90% - so what?  THEY CAN'T FAIL.  That's what TBTF&Jail means.


"Competition is sin."

Indeed - so why not wipe it off the map once his front corporations are TBTF&Jail?

This is elementary.  To believe they will hyperinflate and destroy their own wealth while bailing out debtors is to not understand human nature at all.

The government is not sovereign, it is controlled by the money power.  Napoleon understood this well...

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~Napoleon Bonaparte

One day, gold in the hand might be worth a $1 million in the bank that is Cyprussed.  But that gold may be worth a lot less in dollar terms than it is today.  But it will exist - something that eventually 90% of banks accounts likely won't be able to claim. Cash is King at some point in the near to medium term, but it will not be easy to keep that cash out of the hands of the "money power" that is "gravely to be regarded." BTW, the banksters knew this point would come over 100 years ago and have 100 years to prepare and plan for it.  You think 911 was an accident?  It was used to set up their police state ahead of this event and implement what Brzezinski claimed was the bankste rplan in 1970... “The technotronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values. Soon it will be possible to assert almost continuous surveillance over every citizen and maintain up-to-date complete files containing even the most personal information about the citizen. These files will be subject to instantaneous retrieval by the authorities. ”
 ~Zbigniew Brzezinski, Between Two Ages: America's Role in the Technetronic Era That was published in 1970... it has been the plan all along.  Oh, and Brzezinski created the al Qaeda that eventually was used as a pretext to implement his plan. He claims it is all random chance...  and politicial King Makers would never lie to the establishment gobemouche's right? “History is much more the product of chaos than of conspiracy” ~Zbigniew Brzezinski ...says the chief conspirator...  but, hey, if the people are that gullible, why not milk them like cows? Debt Money Tyrranny Solutions are listed on the second page.  I'd also add keeping excess cash in Treasury Direct and then siphoning it out and buying hard assets as the deleveraging sharpens its teeth and strengthens its bite. Gaining control over the necessities of life in a positive community environment should be goal #1.

How to be a Crook

Poverty is not a Choice

Debunking Money

Renaissance 2.0

Secret of Oz

Tragedy and Hope Part 7, Chapter 19 - Inflation and Reflation (must read to understand how the central bankers ARE THE GOVERNMENT in this financial empire that rules over us)

PS - hyperinflation is likely the end game, but you have to survive with assets in hand between now and then.  Most will not be able to do this - especially if one is situated for hyperinflation without any control over the necessitites of life.  Hyperinflation will occur after the banksters have traded in their worthless fiat and worthless debt for real assets - exactly as most hear intuitively understand needs to be done.  They are TBTF, though, so they aren't worried about prices or being bankrupt.  They can't fail.  When they've asset stripped society, they will then hyperinflate to "balance their books" and proclaim capitalism as a failed policy.  They will then sell the following to the starving, broke masses held in check at gunpoint and through their potential starvation:

"We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the work is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries."
~David Rockefeller, founder of the Trilateral Commission, in an address to a meeting of The Trilateral Commission, in June, 1991.

All Risk No Reward's picture

I would prefer to garner a "bravo" in a way other than outliing the destruction of even a veneer of freedom in the world.

Spread the word.

Either we all hang together or we shall hang separate - wasn't that an insight from Benjamin Franklin?

Obese-Redneck's picture

Why, might you ask yourself, woudl the power of money lend 30 year mortgages for sub 4% ahead of bout of serious monetary inflation?  The current price inflation is primarily due to speculation in commodities markets by mega-banks that are stealing trillions from the ignorant proletariat and then using it to gamble up the price of commodities.  This is nothing new...  The only thing new is they now pass off their losses to the ignorant "consumer" instead of the corporate bank structure: \

Great question, somebody got an answer? I assume they know we are not going into inflation but into deflation and rates will continue to drop?

Great read 'cept for the 911 stuff and hyperinflation, high inflation maybe not hyper.

involuntarilybirthed's picture

Don't this tell you something is a little off the average course?


q99x2's picture

The shaking in the system has started it may be hard to stop with money printing and rumors at this point. At least outside of systems that the FED does not have its computers hardwired into. Basically the financial system has already collapsed and the transfer of wealth out of solvent systems has reached a point where the support structure has been eroded to the point where the top is wobbling.

The FED can't syphon off enough at this point to keep the military industrial complex afloat and appease the peasants from marching on the Hamptons.

Chris Martenson wrote an article this week that shows why he thinks the time is upon us. I agree.

And, the criminals in Washington have set in position the military apparatus to take down the United States of America and bring it up as part of a larger North American entity under UN control. All the important laws being passed in congress have to do with the takeover of the United States by the banking system and the UN.

What is weird is that the intellectual class of which I include doctors and lawyers and mid-sized business owners, technologists, writers, filmmakers, and those with $200,000 plus incomes stand to lose the most and yet you hear little from them as this fucking modern version of Nazi takeover goes down. Not only them but the fools that work for mainstream media. Their lives are going to be decimated and not more than a peep.

And lastly what if the bankster's, corporate and UN take down of America fails?

I mean they have 1000s of first responders, Russian troops, TSA, DHS, National Guard, the Military, Militarized local police departments, the CIA which are actually part of each of those mentioned and a drone force. What if those groups begin to battle each other in America?


NaN's picture

This UN takeover idea... is pure rhetorical fantasy. Sorry. The US (and another infamous notable country) ignores the UN when it is convenient and UN forces are just forces from member countries with the label UN. 


Son of Loki's picture

If the Fed stops printing, the S&P will promptly collapse 50%. Hinting of a slow down even causes panic.

css1971's picture

Nah it'll be fine.

Hilsenrath will publish story telling the world that Ben is just misunderstood.

GreatUncle's picture

I just know, when the day arrives and the wheels truly fall off I can stand and point at the central bankers when people want somebody to take it out on. Deserved? Leave you to make up your own mind on that. 


bobbydelgreco's picture

if you don't know there's a difference between the euro & the $ and your confused like this chucklehead who thinks that because the problems are the same the currencies are the same then your stupid enough to be a gold bull but when the euro goes & it will when miss piggy is in charge & all ben's hard work (much of it illegal) to devalue the $ fails then gold's enemy will crush the pm's

g'kar's picture

I have no clue as to what is coming. I'll continue to stand fast until something gives:

1) no debt

2) cash

3) gold and silver i bought in 2002 and not added to

4) paid for home

5) no purchases outside of essentials

6) patience

ECE's picture

the sooner the specter of ownership and embrace of paper liquidation of gold ETF's investors the better.   Real GOLD bugs, (physical buyers) are not speculating in the hard metal for a short term determination of right or wrong.    Buyers of hard delivery of precious metals are not investing any more than buying a new deck for their home.   Precious metals are a security, and asset which can and has met the test of time.    Gold bugs dont need to go into the illogical monetary conundrum we find ourselves in accross the globe.  Paper is paper,   Commodities are tangible.  this is why this  US Free money experiment will fall very hard.   YOu can only float any concept for a discernable time period.    Indefinate accomodation only works in a communist state where opportunists are not permitted to proift from the audacity of the few.



falak pema's picture



When he rises up, the mighty are terrified; they retreat before his thrashing.
26 The sword that reaches him has no effect, nor does the spear or the dart or the javelin.
27 Iron he treats like straw and bronze like rotten wood.
28 Arrows do not make him flee, sling stones are like chaff to him.
29 A club seems to him but a piece of straw, he laughs at the rattling of the lance.
30 His undersides are jagged potsherds, leaving a trail in the mud like a threshing-sledge.
31 He makes the depths churn like a boiling cauldron and stirs up the sea like a pot of ointment.
32 Behind him he leaves a glistening wake; one would think the deep had white hair.
33 Nothing on earth is his equal—a creature without fear.
34 He looks down on all that are haughty; he is king over all that are proud.