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Why All Central Bank Efforts to Save the System Will Ultimately Fail
ECB President Mario Draghi has cut interest rates again.
Yes, they were already negative. Now they’re even more negative. Because in the world of Central Banking if something doesn’t work at first the best thing to do is do more of it. Whatever you do, DO NOT question your thinking or your economic models at all.
We’ve seen this same scheme play out in the US with QE. By the Fed’s own admission, its QE programs have only lowered unemployment by 0.13% (mind you, the Fed found this by using the overinflated unemployment data from the BLS, the reality is likely even worse).
Then there’s Japan, which has been launching QE for well over 20 years and has never experienced a sustainable uptick in GDP growth or employment. Their thinking was that if spending over 20% of your GDP on QE fails to generated growth, why not announce ANOTHER QE program equal to another 20% of GDP!
At the end of the day, the world is simply too saturated with debt. The reason for this is that Central Banks have promoted easy credit and low interest rates for decades, resulting in everyone and their mother borrowing money to spend, build factories, invest in technology, etc.
This has a diminishing marginal utility. In the 1960s every new $1 in debt bought nearly $1 in GDP growth. In the 70s it began to fall as the debt climbed. By the time we hit the ‘80s and ‘90s, each new $1 in debt bought only $0.30-$0.50 in GDP growth. And today, each new $1 in debt buys only $0.10 in GDP growth at best.
Globally today, debt is now a massive overhang and a drag on growth. When you’re in debt up to your eyeballs, borrowing more money at cheaper rates doesn’t do much for you.
Consider European banks. Taken as a whole, they are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets. Remember, for a bank, a loan is considered an “asset.” So this means that the bank generally speaking has made €26 in loans for every €1 in capital on its balance sheet.
When you are leveraged at these levels you only need your assets to fall 4% before you’ve wiped out all of your underlying capital (€26 * 0.04 = €1.04). At that point you are total insolvent.
There is nothing you can do to remedy this situation other than:
1)raise capital
2)pay off your debts
3)default
Borrowing more money at cheaper rates might provide short-term liquidity, but it does nothing to reduce your leverage in the real world. This is why Mario Draghi’s efforts to lower interest rates even further into negative territory will fail. It’s why generally speaking, all Central bank policy is failing to generate growth: Central Banks can’t really do anything to remedy the situation!
However, until the world finally realizes this, we’ll continue to see Central banks engage in absurd schemes to try and generate growth. They will ultimately fail. The question is when.
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.
Best Regards
Phoenix Capital Research
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This has gone on for much longer than most have predicted. I would rather not pick the top. Wait till this bubble pops before starting to short?
Like the old man in Reminiscence of a Stock Operator said "it is a bull market".
Unless the zionist banksters are culled, we will be stripped bare and disposed of; & I expect they own the funeral directors too.
The FED simply kicks the can down the road as far as they can with as many QE programs as they can get away with. QE4 is next.
Amazing how Congress and the media let the Fed get away with their lies and stock market manipulation.
Something is very wrong when you have both Rand Paul on the right and Bernie Sanders left both saying to audit the FED.
And now for something completely different ...
Capital allocation schemes difficult for the present world-view to encompass:
See
http://andreswhy.blogspot.com/2009/10/fuehrer-prinzip.html
http://andreswhy.blogspot.com/2013/12/nazi-stealth-plane-andre-willers-2...
http://andreswhy.blogspot.com/2012/05/why-freedom-systems-win.html
Good stuff. Thanks.
It's not only the central banks that are to blame. ALL banking is to blame. I run a small business with a handful of employees. We are actually growing at a rate of 30%+ a year (this for the last 6 years straight), mainly through my taking almost nothing as an income and rerolling any profits back into the business to achive more growth. I have tried repeadedly to go to various banks to get a simple business expansion loan (anything in the range of $100K - $250K) and have been flat turned down everytime. This after going through the long paper submission process and despite the fact that I and my business are both on a very good credit worthy rating. What is even more insane is the fact that my employees have better access to credit than I do for the simple reason that Iam self employed and they are not.
The bottom line is that these banks REFUSE to loan out anything to anyone for any worthwhile cause, no matter how credit worthy or prifitable you are. I know that with a modest injection of cash into my business at a reasonable interest rate, I could see triple digit growth instead of the 30% I am currently experiencing. Long story short, the ONLY people out there willing to provide loans are various independent funding agencies that hit you with interest rates of 30% or more (some as high as 65%). I get faxes sent to me all the time promising "Fast Cash" for my business at rates that are totally insane! This is no way for an economy to run itself.
Your employees are personally liable for their loans, you presumably would not be.
have you looked into crowdfunding?
Surf on over to lendingtree.com and see what you can get... If they don't fund it, there are always alternate avenues. Hell, tallk a good enough game, provide enough detail, and some of us on ZH may throw a few bones....
To reply to several comments at once -
No, I am not black, or a minority, or female, or handicapped, or mentally disabled, or gay, or anything else that would qualify me for special treatment from the government.
Been to Lending tree.com as well as a number of other similar sites. For businesses, they all refer you to short term, high interest loan sharks. I am currently looking into "possibly" (but only as a last resort) getting an equity loan on my multi-acre property which is out in the country, fully paid off and worth easily $3/4M but I am very reluctant to put my only lifeline for survival at risk cause you never know if next week Obozo (or whoever the latest PTB that is in charge) succeeds in plunging the world into a debt based third world war holocost and the only security I have is owning the roof over my head free and clear. Who knows, maybe I am an idiot expecting the govt to respect my property rights and not throw me out in the street just because some power hungry paper pushing bureaucrat clicks a mouse somewhere and they start siezing properties everywhere at gun point. The Nazis did it to the jews, the non-white left wing majority in this country might go the same route just because they can.
Looked at various crowd funding and "micro loan" services but the amounts that they offer are typically only $5K - $25K, not enough to expand my office area and hire new sales staff or even do a little outsourcing of certain things that I want to do.
FYI - I run my business from my home and have my office in my living room and part of my 1,200sf garage remodeled into another office where tech support operates. I provide websites specifically for used car dealers. 6 years ago I had 12 clients. I now have almost 900 and am the 5th largest provider in the nation for what it is that I do. My aim is to increase my customer base to where realistically I have 5,000 - 10,000 dealers using my services. There is nothing stopping me from doing this but I am more of a manager/geek programmer than I am a salesman so I readily admit that this is where I need the most help. Anyone interested to see exactly what it is that I do can check out my company homepage at www.autocorner.com If you know any dealers out there who want a better website, hey, send them my way!
If you are incorporated, maybe you could issue preferred stock. It was the way companies used to "be their own banker".
You aren't black, are you?
The Banksters are parking money at the Fed and earning interest, they say fuck to loaning, this is RISK-FREE $$$$
"The Central banks are going to fail!"
In the immortal words of Agent K on MiB,
"Did they say when?"
People will not even be able to keep their freedom unless deposit bank leverage is greatly restricted by law. The officers of the bank and the state "regulators" who supposedly oversee them should be held PERSONALLY LIABLE for the assets of the bank should their value fall so that leverage is raised above the mandatory maximum (four or five to one).
If rules like this are not in place, in boom times the one who leverages the most gets richest fastest while those who don't hyper-leverage feel like fools. Then the bust comes, as it must always do when leverage is not restrained, and those who leveraged most and "own" everything go to the political class and explain to them that if they don't help them steal back the money then the economy will fall apart and the people will blame them. So, they help them try to steal back the money, which just encourages them to go back to the casino. They keep the winnings bets, and sell the losing ones to the taxpayers.
Those two rules I mentioned about limiting leverage and making officers personally liable for bank assets, are two of the seven principles needed to keep the finanicial sector from taking over your nation and government and centralizing all political power for their benefit. If you want to know the rest, it is in "Localism, a Philosophy of Government" https://www.createspace.com/4905824 or direct on Amazon.
Methinks the jig is up. Prepare for the worst.
Quickly, now.