Another Former Central Banker Finally Gets It: "The Idea That Monetary Stimulus Is The Answer Doesn't Seem Right"

Tyler Durden's picture

What is it about central bankers who wait to tell the truth only after they have quit their post. First it was the maestro himself, the Fed's Alan Greenspan (most recently in "Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It"), and now it is the Bank of England's former head, Mervyn King, who yesterday told an audience at the LSE that "more monetary stimulus will not help the world economy return to strong growth." That this is happening just as we learn that in one year the world's 1% will collectively own more wealth than the rest of the world combined, and two days before Goldman's Mario Draghi unleashed up to €1 trillion (if not unlimited) in QE, is hardly as surprise, and will be surely ignored by everyone until the inevitable outcome of another "French revolution" finally arrives.

From the Telegraph:

In his first public speech in England since his term at the BoE ended in June 2013, Mr King said he was concerned about a persistent weakness in global economic demand, six years on from the depths of the financial crisis.

 

"We should worry about that," Mr King told an audience at the London School of Economics, where he was once a professor.

 

"We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years ... is the answer doesn't seem (right) to me," he added.

 

Unlike the US Federal Reserve and the Bank of England, the European Central Bank has until now resisted trying to boost the economy by buying government bonds with newly created money, known as quantitative easing (QE).

 

"There are quite serious disequilibria both between and within economies that, for good economic reasons, are depressing demand. Simply lowering rates even further or adding more monetary stimulus is unlikely to solve that problem," he said.

Which is not only ironic but hypocritical because under King, the BoE bought £375bn of government bonds between 2009 and 2011. Mr King said this was right just after the crisis, but that using loose monetary policy to bring forward spending was not a long-term strategy. 

Actually, wrong: since the entire global economy has been hijacked by the same people who would be sleeping under bridges had they not received a multi-trillion bailout in 2008, and since the global financial system now exists only to serve them, and to raise them from billionaire to trillionaire status, QE is precisely that: a long-term strategy, one which will ultimately pillage all the wealth of the middle class and hand it on a golden platter in some non-extradition country to the 0.001%.

Well, long-term at least until the 99% realize they have been subject to the most epic, historic robbery in the history of the world.  Of course, by the time what was formerly the world's middle class realizes what happened, there will be nothing left.

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JungleCat's picture

Mervyn King "got it" all along.

As Upton Sinclair remarked: it is difficult to get a man to understand something, when his salary depends upon his not understanding it.

Oldwood's picture

Monetary stimulus is not about fixing anything. Its simply a holding play to allow them to extract as much wealth as possible before we all give the fuck up. There is nothing more useless than an unmotivated slave.

NoDebt's picture

Former central banker.  Yeah, they're all tough guys once they're no longer in a position to actually do anything about it.

LawsofPhysics's picture

Exactly.  Stating the obvious after benefitting handsomely from massive fraud.  look, in the absence of real consequences, nothing changes.  Make them return the stolen wealth and title or take their fucking heads.  It really is as simple as that.

nope-1004's picture

Lampost & rope.  All bankers lie, and this POS lies too.

 

MillionDollarBonus_'s picture

The indecision and lack of conviction from our monetary leadership is very worrying. We desperately need a unified global monetary policy in order to effect lasting economic changes in the global economy. I fear that if our leaders cannot come to a concensus on what is needed for world economy, we may be forced to set up a global governing body with the power to override the decisions of the nation states. This will allow us to enact monetary policy at a global level and create economic stability and growth across the globe in the most efficient manner possible, although it will also come with a loss of sovereignty and will be widely resented by nationalist and right-wing interests.

smlbizman's picture

king made enough comments while he was in the jungle that he got it...but im sure the darkside keeps all these guys in check....or a galvinized ribbed 16 penny to the head 8 times may influence ur options...

eclectic syncretist's picture

A system based on creation of money from nothing at the whim of a few will always degrade the morality of the culture as a whole, and end in catastrophe. We have front row seats for this round (in history), but the important question is, will we prevent it from happening again?

whotookmyalias's picture

Cue the Krugman smackdown video.  How can doing more of the same things that created the problem be the cure for the problem?

pelican's picture

So how big of a retirement package did he get?   All that QE money must have padded it nicely.  He should shut his dick hole.

Nobody For President's picture

Ah, MDB is back on target - good to see you so drolling trolling...

And I submit "disequilibria" as the ZH 'Word of the Week' (TM)

RaceToTheBottom's picture

Nothing different than the guy who gets religion in the last two weeks of his life....

Fine, if it works for him, but he get no points from me.  No difference than if he didn't change his view....   Actually maybe less.

whotookmyalias's picture

We don't understand how making the rich even richer and blowing bubbles in housing, oil, and derivatives hasn't created more jobs, reduced inflation, and helped stimulate growth.  

The Merovingian's picture

Pssst .... Hey Mervyn ... that warm soothing glow you see in the distance isn't a beautiful sunset ... it's the torch and pitchfork parade getting ready to break the horizon ...  you've dug yourself a very deep hole old man ...

Ghordius's picture

note, though: "Unlike the US Federal Reserve and the Bank of England, the European Central Bank has until now resisted trying to boost the economy by buying government bonds with newly created money, known as quantitative easing (QE)." 

NoDebt's picture

You make that sound like it was an active choice.  If the ECB could have done it on their own as easily as the Fed or BOJ did over their (fully integrated) sovereign nations, it would have been done years ago.  Only German push-back has stood in their way.  

In the US there are no governments or entities that can push back on the Fed.  Imagine California trying to push back on the Fed and prevent them from doing QE.  The mere thought of it is ridiculous in the US.  But Europe is clearly NOT the US.

centerline's picture

Almost like he is lighting a bag of poo on fire at the ECB stoop. 

Ghordius's picture

first, it was, imho, an active choice. lots and lots of thinking was put into the LTROs

second, it's not always and only Germans. plenty of other europeans are against QEs and monetization. for criminy, we wrote it in the treaties

third, I agree. Europe is not the US. Actually I spend quite a lot of comments on this theme

another two days and we'll hear from Draghi what his merry bunch of national governors has concocted this time. I expect some national bank "action"

NoDebt's picture

Those damned treaties and constitutions always getting in the way of things.  I know you guys are doing your best to sweep that stuff aside as quickly as possible, just as we are in the US.

If I may make a suggestion:  you need to stop allowing individual nations within the EU to have any say on what the ECB does.  We unleashed the Federal Reserve in the US about a hundred years ago with no restrictions on it's power.  And look how well we're doing!

(Yes, that was sarcasm.  I rarely point that out but I've found my humor sometimes doesn't translate into European.)

schadenfreude's picture

An advisor to European Court of Justice stated, that QE under specific terms is not against the treaties. So, before this could be challenged Draghi needs to create facts fast.

Ghordius's picture

I challenge the whole "need" thing. there is no need for QE, except in the mind of some die-hard megabanksters and Dr. Krugmans

smukster's picture
smukster (not verified) schadenfreude Jan 20, 2015 12:08 PM

Even if it does: Who cares? Who cares about rules and treaties when the stakes are so high?

E.g, was the bailing out of banks foreseen in any constitution? Nope. Are wars compatible to intl rules? Or massive spying? So same goes for QE, whether it's allowed or not...they'll do it.

Ghordius's picture

some continental europeans have no humour to write home about, so don't worry about the translation effect

we have actually the national banks to restrict the power of the ECB. and the sovereigns to restrict the power of the EU. does not always work perfectly, but humans seldom do

FreeMoney's picture

So what, exactly, is on the ECB's balance sheet?  And how was it purchased?

Ghordius's picture

if my memory serves me well, all national banks contributed to the original equity, with a key. funnily, even the Bank of England is a shareholder, albeit without voting rights

to gain voting right, the BoE/UK would have to adopt the EUR, and such horror is too much to contemplate, for both Britons and increasingly for us continentals as well

smukster's picture
smukster (not verified) Ghordius Jan 20, 2015 12:05 PM

Nothing new: Germany has a tendency to always resist new global trends for a long time before jumping on the train when most everyone's already getting off. But once on it, they'll ride it more dogmatically than anyone else...(note that this could be either good or bad, in principle)

Of course QE by itself doesn't work, nobody ever believed that right? What it does is inflate markets even more thus stabilizing them in the short term and buying govts some time. Either they use it to better their policies, or they don't. Usually the latter.

RaceToTheBottom's picture

Fine, European Central Banksters can be executed right after the US ones.  

It really is that binary....

Oldwood's picture

Is that like a reformed whore? Did he have "daddy" issues too?

dumbStruck's picture

Logged in just to up arrow you for that pithy quotation.
Those chosen to assend to high office must unfriend themselves with truth. Only after leaving office is it permisible to attempt to rehabilitate one's reputation.

miker's picture

I don't particularly subscribe to all the conspiracy theories about the 1%. I don't deny that QE is a bad policy in the long run but I think the motivation is purely to keep the system from crashing....as much for the benefit of the average person as the rich.  Could be wrong of course.

JungleCat's picture

It's not the 1%, it's the 0.01%.

Respectfully: you are naive.

Fun Facts's picture

Top 0.1% of Americans Hold as Much Wealth as Bottom 90%

http://www.breitbart.com/big-government/2015/01/19/top-0-1-of-americans-...

"It was an accident" - ZWO bannking overlords

Oldwood's picture

And while we can ponder all the possible conspiracies at play, the fact that wealth is increasing as a percentage of the population for this top .01%, should be all we need to know to understand the motivations for the current policies. They always say if you want to discover the root of any problem simply follow the money. Nothing is an accident, (or in "political correct") unintended consequence.

Ghordius's picture

the root of it is the globalized economy and the effects of the Pareto distribution. which has nothing to do with the real problems in the US

the first affects the world, the second... too. but if we don't disentangle the two we won't find any solutions

as a reminder, Bill Gates sells his product in the whole world, making lots of money more then if he would be restricted to the US market alone. does he pay a special tax for this privilege? no, he actually pays less, in proportion, to most Americans. And there you have a perfect example for this entanglement, the global effect of the Pareto Curve and the special situation of the USA

Oldwood's picture

Not sure I understand your point. If the Pareto curve exists in nature, I would assume it will remain with us. If a 80/20 distribution is the natural ratio, then I would assume it is also the most efficient ratio as otherwise it would not exist in nature. When we see that ratio shift to say 90/10 or 95/5 then yes, we may well have a problem. But the socialist view is that no such curve should exist. All things are uniformly held by all factions. This doesn't work. Or the principle of ownership to work, to have a beneficial outcome, requires responsibility for that ownership. AS corporations and governments grow in size their accountability, their responsibility declines, as it becomes shared by groups of individuals so large that it becomes impossible. If a business is owned by too many partners, ultimately no one is responsible and it ultimately fails if no one person or relatively few people does so. In my world, we are payed, not so much for doing as taking responsibility for what we do. The more responsibility we take, and are successful, the more we earn. Hire someone and tell me this isn't true. Once the scale becomes so large, the model exists but its functionality doesn't. There are many examples where models break down. One is in dealing with high tech high trend businesses that due to market dominance and ownership of specific technology have huge advantage. Show me a company with Microsoft or Google profits in say, mining, or furniture manufacturing. new industries always have statistics outside of norm. And they are continually thrown back in our face as being the model of how things should be...which is stupid...as stupid as suggesting that we all could retire and live from clipping coupons because the top 1% do. The exceptions exist because they are exceptions, not the rule.

Ghordius's picture

Oldwood, take one island, 10 inhabitants, closed economy

2 own 80% of the island and everything it is on it, 8 own 20%

the two, most call... Dad. Joe and Jim, with their wives Jane and Jill, and their 3 children each

take 10'000 inhabitants. 2'000 own 80%. But the Pareto distribution works finer then that, and 20% of the 20%, i.e. 4%, own 80% of the 80%, that's over half of the island already

that's the new top-of-the-top, the upper class of 10'000 -> 400

three wealth classes are born. the 400, the 1'600 and the 8'000 (which btw is classic ancient Athens. the "400" had to sponsor a warship each in war)

now make that calculation for nearly 10 billion and see how many top-of-the-top new "super-rich" classes this can create... if left to it's "natural" course

the point I'm trying to make here is that if you have two closed economies next to each other, each will have it's Pareto distribution

and if you merge the two economies to one... the Pareto distribution shifts. up to the nearly completely globalized economy we have now

Ctrl_P's picture

And let's use the maths to the 3rd level...

 

20%^3 = 0.8%       (as close to fuck as "1%" possible.)

80%^3 = 51.2%      (smells like "half" to me)

 

The way I see it, the globally richest 1% own half the global wealth.

 

Wow, now maths has a political agenda??

MEFOBILLS's picture

What about increment of association?

When Tesla gave us Polyphase power, he multiplied the labor value of mankind by many thousands of times.  Did he become thousands of times richer, even though his contribution to humanity is beyond measure?

What about goods of the earth?  Since humans are born unto this earth, they should not have access to it denied by a class that thinks the "earned" it somehow. 

This whole idea about paretos and ability being the only contribution to wealth generation is false.

All wealth is Labor + Machine + Earth.  Earth provides energy and materials, and machines multiply the output.  In many cases wealth is made without much in the way of labor inputs anymore, especially as smart machines and computers take over.

Financial capitalism will aggregate this wealth of the earth + Labor to itself.  It is a defect in Finanical Capital itself. 

All inventors and creators, when they die, don't think to themselves - Gee I hope the permanent improvement in efficiencies that I created, I want that wealth to pareto to financial actors.  I also hope that this wealth goes to people who somehow think they are more clever and deserving, even though they have no idea they were born on third base, and their ancestors gifted much to them. 

 

MEFOBILLS's picture

The natural growth curve is fast at first, then flattens out and goes into steady state.  Did your feet keep on growing into old age?  After awhile you would not be able to walk.

 

Financial capitalism wants to overlay an exponential curve onto human civilization and also what is a natural organic planet.

 

We will need a new kind of money. 

Urban Redneck's picture

So what? I've worked my ass off, saved and invested wisely to get where I am (somewhere in that 1%), how many of the bottom 20% who have negative to zero net worth does it take to equal my net worth? - a whole fucking lot of them...

The presentation of statistics is often manipulated to achieve aims - are you suggesting everyone should be made equal by redistribution by the State?

If you want understand wealth tranfser by financialization, you need to look at the differences in net worth between the 1% (~3 million people), the .1% (~300k), the .01% (~30k), the .001% (~3000 people), and the .0001% (the 300 "financially" richest Americans) - and how that distribution has changed over time (as the economy has become more fincialized and the Central Bank has become more active to mask the deterioration of real economy).

The .0001% have stolen/transferred moar wealth and savings from the rest of the top 1% than they have from the bottom 50%.  (isn't math fun...)

If you want to address the broader wealth disparity I would suggest looking at why the USSA has educational and tax and state benefit regimes that favor incursion of debt over savings and investment, and once that is understood look into how debt can be and often is "transformed" into wealth for those with scale and leverage (converting subprime slime CDOs into tangible wealth is only the beginning). 

Ghordius's picture

+1 or the broad implications of US student debt. or those of "everybody ought to own his home". or those of the 401(k) accounts. or those of "companies are people and my friends". or...

noben's picture

And that is why, my American friend in CH, I favor that kids (in high school) be educated in Financial Math, Game Theory, Trading and Small Business skills.

Those who learn these skills are far more likely to climb the socio-economic pyramid. Those who do not, have probably been taught their "preferred place", because their parents thought it a good and ideologically-comforting idea to keep them at the same niche that they occupy: the 99%, or more likely the 80%, if even that.

Although, being born in or joining the "2% Club" helps that vertical take-off into the 0.1% or higher.

i_call_you_my_base's picture

You weren't too far off until here:

".as much for the benefit of the average person as the rich.

It's to keep the system of enriching oligarchs and cronies that they are saving.

It's also worth noting that the "average" person in the US has no assets or investments.

Chupacabra-322's picture

"stimulus after six years ... is the answer doesn't seem (right) to me,"

Of course not ya Dickhead. You Bankster Scum Fucks produce or contribute absolutely nothing to the real Econmy or Free Market Place.

You Pure Evil Psychoapthths only export inflation & contribute death, murder, rape, pillage & destruction Globally.

highly debtful's picture

I think I'll side with you on this one, facing the ZH firing squad, because I've never understood why it would be in the interest of the 1 % or 0.1 % or 0.01 % to bankrupt all the others? It's like Johnny Weissmuller intentionally pissing off all the piranhas while crossing the Orinoco.

Sure, they're greedy and remarkably amoral, but it just doesn't make sense to condemn everybody else to abject poverty.   

i_call_you_my_base's picture

"Sure, they're greedy and remarkably amoral, but it just doesn't make sense to condemn everybody else to abject poverty. "

If becoming rich comes at the cost of making everyone else poor, you think these, in your words, greedy and immoral people won't go for it?

highly debtful's picture

I should have added "cunning", because generally these people aren't stupid. Wouldn't you think they know the faith of the parasite and therefore want to make sure the general population at least retains enough not to riot? 

If not, the whole situation reminds me of someone being the only prepper in town, well stocked and well armed, but surrounded by a bunch of people with starving kids. Not a situation I'd like to be in.

i_call_you_my_base's picture

You should have also added "delusional", because I think they believe that all of their wealth and the government will save them from the riots. And there is a lot of history to suggest that oligarchs will push it to the very limit, and over the edge.