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"The Entire Theory Of Monetarism Is Coming Undone In Spectacular And Empirical Fashion"
Submitted by Jeffrey Snider via Alhambra Investment Partners,
The European mess is coming more into view, and in almost every case that is a negative outcome. There really isn’t much going right in Europe right now, belying everything that was said, done or proclaimed only a year ago.
Italian unemployment unexpectedly rose to a record high that’s more than double the German rate, keeping alive concerns about the diverging growth outlook in the euro area.
The jobless rate increased to 13.4 percent from a revised 13.3 percent in October, while separate data showed the euro-region rate at 11.5 percent. The reports contrast with data from Germany showing unemployment there fell to the lowest in more than two decades last month.
I highly doubt that Italy’s retrenching was “unexpected” as weakness has been obvious in the Eurozone for months now. If it wasn’t enough that credit markets are so completely distorted as to be unrecognizable to fundamental tenets of finance, then at least observing the desperation with which the ECB has operated since June would be a clue. And that raises a fundamental question about mainstream views on monetary economics, as expressed below by the New York Times in merely observing, detached, the final coming of “negative inflation.”
But the question raised by many economists is whether the European Central Bank has waited too long to act, and whether its arsenal is powerful enough to address the eurozone’s fundamental problem — a dearth of demand from businesses and consumers for goods and services.
Have not the economists noticed the constant attention on Mario Draghi this year? I find it hard to believe that everything the ECB has done to this point has slipped unnoticed even to the narrow gaze of “economists.” Rather, they likely wish that nobody would notice how everything, which has been a constant and unnatural noise emanating from that balance sheet, has simply failed to this point.
Plotting Eurozone “inflation” shows absolutely no imprint of the ECB anywhere, so maybe unfamiliar observers would be forgiven for missing all the fuss; none of the trillions in euros have mattered and that is the main point to which “economists” wish to plead ignorance (on your behalf).
The second part of that NYT quote may actually be more problematic, as if the ECB could invoke “demand” out of monetary nothingness. Aggregate demand adherents, who encompass the entire orthodox complex and nearly every major central bank (with one evolving), certainly believe that increasing credit is tantamount to conjuring “demand.” To that end, “fixing” the banking system was paramount, but we see unequivocally that there is no reciprocation, at all.
The entire theory of monetarism is coming undone in spectacular and empirical fashion, which leaves the entire status quo exposed. All that is left in defense is the same old refrain of “it wasn’t big enough.” That’s great for those in the ivory towers blinding themselves to the reality of a lost generation of Italians, Spaniards, French and now even Germans; a listing to which even the FOMC is worried may yet add Americans.
Why anyone ever expected a different outcome is due solely to unrepentant ideology, since these central banks are following almost exactly the Japanese “model.” The global economy is just following along as money dies. Though Greece will be blamed as contagion, it will ultimately be proved as Japanification by monetary proxy.
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"certainly orchestrated between the FED, Dudley's desk and a few major players."
William Dudley, of the NY Federal Reserve, is a former Goldman Sachs employee and still has associations in the firm.
Plus Dudley being able to transfer funds into equites makes him a manipulator.
It's just so incredibly obvious I don't know why only now are most people coming to the realization that the US is sim ply repeating the exact circumstances and policy response of Japan from 1990 to now.
A huge money and credit bubble caused massive asset inflation (real estate mainly) and then it burst.
Instead of letting the bubble collapse and let the market return wealth to it's rightful owners, CBs intervened, bankruptcies were not allowed to happen, and so the corrective measures necessary were dragged out over 25 years (!!!!!) and counting.
The similarities are glaringly obvious.
Why anyone thinks we'll have a different experience than Japan is beyond me.
Japan's twin bubbles destroyed wealth around 300% of it's GDP and it's economy never truly shrunk while maintaining high employment, and you call that a failure? Seems like a win to me.
America had about a third of the wealth destruction of Japan in te last depression and saw its GDP shrink by 40% in 4 years through Mellon's "liquidation" and took 15 years to truly recover during the war...
It's not monetary policy that's failing, it's fiscal policy.
Blah blah blah.....
WHEN?
Yeah yeah...happening now.......30 days for me ...........
...................exodus
We have also discovered supply side economics is a nonsense.
Ask China if supply creates its own demand.
After a couple of decades of supply side economics, we now find demand is the problem.
Multi-national corporations do not believe in supply side economics, this is why they are not investing and sit on their massive cash piles.
US corporations do not believe in supply side economics, this is why they are not investing and engage in share buy-backs.
Unfortunately, it is only the economic planners, the economists, who still believe this nonsense.
The US has massively damaged its position in the world being the cradle of supply side economics.
In a demand driven world the US cosumer was long seen as the engine of the global economy.
Everyone wanted access to US consumers which made the US powerful.
After a couple of decades of supply side economics and belief in the trickle down effect the US comsumer has been all but wiped out.
What use are the US 0.1% to the rest of the world?
They don't actually generate a great deal of demand for products and services.
Their main interest is in taking over whatever they can and are people best avoided by other nations.
The US has really shot itself in the foot with supply side economics.
Why was supply side economics embraced by the world?
It was a set of ideas justifying extreme wealth at the top.
For global elites what was there not to like?
Dude... there hasn't been supply side economics used in China, the US, Europe or anywhere else since Thatcher and Reagan.
What is being used is demand side, Keynesian economics, welded to welfare state policies. Undermining the Schumpetarian model of organic economic growth, for Keynesian stimulated growth through government deficit spending, is crony capitalism at work and history shows is a failure every time it is tried. It always leads to economic collapse, ie hyperinflation and the collapse of the currency... it can't not.
Day 3....and yet again, the morning starts with all hell breaking loose in Paris,
Unconfirmed 2 dead and 20 injured,
Suspects are now trapped in a building in the town of Dammartin en Goële, with at least 1 hostage,
Look at the body language of Hollande's people. Holy shit.
There has been another bloodbath, IMO.
A nightmare for France.
Whatever happened early this morning is being suppressed,
It was breaking news on several channels earlier on, now nothing,
I suspect the cops have made a major fck up,
Bloomberg scoop.
Half a TRILLION dollars of euro QE fantasy paper-printing equals a RISE in the euro vs the dollar.
The problem as I see it is Japan is doing the very same thing as Weimar Germany did after WWI, but saying they are in control, well they are until the currency collapses and that is the trigger for hyperinflation-when noone wants to hold your currency,there are no buyers and the government has to print more and more just to feed people,Japans stockmarket topped out in 1990 and has never recovered,it will eventually but it will all collapse along with the currency,that could be the trigger for the bursting of the US bubble and Fed manipulations,trouble is we are years away from that happening.
Italy is a corrupt mafia state. Don't forget to take that into consideration when analyzing the development of their economy. It has an enormous negative impact.