RBI Governor Fears Market Crash With "World Less Capable Of Bearing The Cost"

Tyler Durden's picture


Outspoken non-status-quo thinker Reserve Bank of India Governor Raghuram Rajan may be set to have his central banker card revoked... for telling too much truth (here in 2012, here in 2013, and most recently here). Having previously noted that "international monetary cooperation has broken down," the WSJ reports that Rajan warned Wednesday that the global economy bears an increasing resemblance to its condition in the 1930s, with advanced economies trying to pull out of the Great Recession at each other’s expense. Simply put, he concludes, "we are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost."


As The Wall Street Journal reports, Rajan explains the difference between now and 1930 is:

competitive monetary policy easing has now taken the place of competitive currency devaluations as the favored tool for playing a zero-sum game that is bound to end in disaster.


Now, as then, “demand shifting” has taken the place of “demand creation,” the Indian policymaker said.


As was the case in the 1930s, the lack of coordination between policymakers is producing spillovers that may be difficult to control, and the world’s financial system may soon face fresh turbulence at a time when central banks have yet to repair the damage that the 2008 financial crisis caused to developed economies.


We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost,” said Mr. Rajan in an interview with the Central Banking Journal.


A sudden shift in asset prices could happen in a variety of ways, Mr. Rajan said. The most obvious route would be as a result of investors chasing higher yields at a time when they believe central bank policies will protect them against a fall in prices.


They put the trades on even though they know what will happen as everyone attempt to exit positions at the same timethere will be major market volatility,” said Mr. Rajan.

And finally on the incompetence of economists (cough central bankers cough)

Mr. Rajan said economists still disregard the central role of financial systems in the economy and believe they can predict upcoming disruptions.


“They still do not pay enough attention–en passant–to the financial sector,” Mr. Rajan said. “Financial sector crises are not as predictable. The risks build up until, wham, it hits you.”

*  *  *
All very Zero Hedge-like, but from the mouth of a former IMF Director and current world central banker...

As Rajan previosuly concluded:

"when it comes to what is ailing the global economy, extreme monetary easing has been more cause than cure. The sooner we recognize that, the stronger and more sustainable the global economic recovery will be."

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Thu, 08/07/2014 - 10:34 | 5058735 Seasmoke
Seasmoke's picture


Thu, 08/07/2014 - 10:37 | 5058751 Headbanger
Headbanger's picture

No shit, really!!??

Who could have seen this coming!?



Thu, 08/07/2014 - 10:39 | 5058760 svayambhu108
svayambhu108's picture

This could make the birth certificate issue history:


Thu, 08/07/2014 - 10:41 | 5058775 dontgoforit
dontgoforit's picture

Nice to at least see someone with the cajones to call it like it is.  He's a breath of fresh air in room full of stale liars.

Thu, 08/07/2014 - 11:58 | 5059168 MonsterBox
MonsterBox's picture

Bail-ins in 3.  2.  1.

Or to the ebola Camp of Chastity you dissenters go.

Thu, 08/07/2014 - 11:01 | 5058881 bigdumbnugly
bigdumbnugly's picture

and here i thought the rbi governor was miguel cabrera...

Thu, 08/07/2014 - 10:37 | 5058753 Newsboy
Newsboy's picture

All residual confidence has now been squandered.

Reset looms.

Thu, 08/07/2014 - 10:52 | 5058801 Quinvarius
Quinvarius's picture

I'm pretty sure the West's dumping of their sovereign gold, and India's tightened import rules to assist in making the price wiggle, starting in 2011, is what started the second leg of this crisis.  You can't really attempt to undermine 80% of the world's savings, a huge amount of real collateral, and almost all government balance sheets, with that sort of nonsense, without major economic disruptions.  No one ever said they couldn't make prices move around short term--Only that doing it would be a major tragedy for the real economy.  So no, I don't think he knows anything about how the world works or what gold does for it.      

Thu, 08/07/2014 - 12:06 | 5059237 Bossman1967
Bossman1967's picture

Bla bla cla DOH same shit diferent day I think

Thu, 08/07/2014 - 10:36 | 5058739 Shizzmoney
Shizzmoney's picture

Sadly, society needs pain.  Not for those at the bottom who are already suffering; it is so that those at the middle and top who have been gorging on those below them for so long.  Theirs *is* coming.

Aug 2015 is the start date for it all.  The Fed plans to taper more.....right into the budget ceiling 2.0 fiasco.  It's also the beginning of the "new" POTUS cycle, which has corresponded with some kind of market downturn since the end of Bretton Woods (examples: Reagan and Flash Crash 1987; Clinton DotCom in 1999; Bush II Housing 2007).

Get your popcorn ready.

Thu, 08/07/2014 - 12:07 | 5059241 Bossman1967
Bossman1967's picture

Golden silvery popcorn yum yum

Thu, 08/07/2014 - 10:40 | 5058766 Bloody Muppet
Bloody Muppet's picture

Bullshit. He's just front running a dip in the Indian economy. No central banker would tell the truth for fear of being suicided.

Thu, 08/07/2014 - 10:41 | 5058767 toady
toady's picture

That is a little too truthy. ..

The bankster definitely don't want the general population to know that they bear the costs of bankster fraud.

Thu, 08/07/2014 - 10:40 | 5058769 LawsofPhysics
LawsofPhysics's picture

What "market" is he talking about?  If you don't allow for true price discovery, then you don't have a fucking "market".

Thu, 08/07/2014 - 11:08 | 5058917 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Right, and over here he kinda fucks himself by saying:

"when it comes to what is ailing the global economy, extreme monetary easing has been more cause than cure. The sooner we recognize that, the stronger and more sustainable the global economic recovery will be."


Economic recovery possible ?



Thu, 08/07/2014 - 10:40 | 5058771 Tenshin Headache
Tenshin Headache's picture

At long last. An honest central banker.

Thu, 08/07/2014 - 10:59 | 5058852 Dr. Engali
Dr. Engali's picture

Lol... There is no such thing as an honest central banker. He is saying these things because monetary policy hits emerging markets hardest. If the shoe were on the other foot his tone would be different.

Thu, 08/07/2014 - 10:41 | 5058773 101 years and c...
101 years and counting's picture

the solution will be simple.  war.  wars costs a lot of money no one has, so there will be a ton more debt.  which means central printers will get to go on a printing rampage.  inflation would soar, but who cares about the bottom 95% anyways?  wars are also good for deceasing a lot of unemployed members of society. its a win-win-win for printers, gov't and the top .1%.

Thu, 08/07/2014 - 10:42 | 5058779 JustObserving
JustObserving's picture

All very Zero Hedge-like

Time to put him on the terrorist list in the US.  Good luck getting a visa to the land of the free. And its poodle country.

Thu, 08/07/2014 - 10:47 | 5058802 Anybody
Anybody's picture

The market is reacting positively today.

Thu, 08/07/2014 - 10:51 | 5058811 toady
toady's picture

Must not have read this interview.

Thu, 08/07/2014 - 11:54 | 5059160 dontgoforit
dontgoforit's picture

"When good is bad and bad is good, you will know this is a sign of the end."  Jesus.  The stock markets thrive off bad news.

Thu, 08/07/2014 - 10:48 | 5058805 buzzsaw99
buzzsaw99's picture

what a fucking maggot

Thu, 08/07/2014 - 10:53 | 5058821 Golden Rule
Golden Rule's picture

If he is a former IMF director then be warned.  This isn't a warm and fuzzy moment where he feels compelled to tell the truth.  It is a by design.  I think as part of the BRICS he is trying to foment the so called rift between the East and West when they are all responsible.  Implode the current system so they can reset with their Global Currency. 

Thu, 08/07/2014 - 10:55 | 5058841 oudinot
oudinot's picture

Rajan, the only CB worth his salt.

Please don't ruin my mood by telling me he used to work for Goldman Sachs.

Thu, 08/07/2014 - 11:03 | 5058892 Latitude25
Latitude25's picture

This guy is a rich Indian.  Without a doubt his wife owns and wears thousands of dollars worth of 22k gold jewelry no matter what he says.

Thu, 08/07/2014 - 11:21 | 5058981 SillySalesmanQu...
SillySalesmanQuestion's picture

I hope he does'nt go near any roofs or hot tubs soon...

Thu, 08/07/2014 - 12:22 | 5059341 rsnoble
rsnoble's picture

Why should the world bear the cost?  You fucking lost it not me.

Thu, 08/07/2014 - 13:15 | 5059720 Jam
Jam's picture

Maybe he could create another Shrine or two over there in India, get some peasants to make a few Gold offerings.

Thu, 08/07/2014 - 14:03 | 5060088 Notsobadwlad
Notsobadwlad's picture

What it eventually comes down to is: you only securely own that which you can physically possess and protect, be you homeless with a shopping cart, a middle-class family, the Rothschild dynasty or a government.

Fri, 08/08/2014 - 02:58 | 5063767 Central Ohio
Central Ohio's picture

He was one of the few to predict correclty the 2008 crash.

Fri, 08/08/2014 - 05:20 | 5063904 onmail
onmail's picture

The same man who advocated transfer of all Indian govt. Gold to UK ?
Was he blind at that time ?
Or was assured a percentage by west ?

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