Saxo Bank Warns "This Is The Endgame For Central Banks"

Tyler Durden's picture

From Steen Jakobsen, CIO & Chief Economist, Saxo Bank, via,

  • Why oh why do we trust central banks?
  • Central bankers are politicians' puppets
  • This is endgame for the central banks

The Swiss National Bank's removal of the franc's peg to the euro last week had far-reaching consequences because we were all taken by surprise. The fact that it would (and should) happen eventually was not lost on the market, but the SNB was as late as last week end talking tough and telling the market that the floor was an integral part of Swiss monetary policy – until it suddenly wasn't any more.

I fully understand the rationale for the move (Jakobsen: SNB move is rationality itself) but like most of the market I'm extremely disappointed in the SNB’s communication and handling of the issue, but that’s the bigger lesson: Why is it most people trust or bother to listen to central banks?
Major central banks claim to be independent, but they are totally under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s all well and good in principle until the economy spins out of control – at zero-bound growth and rates central banks and politicians becomes one in a survival mode where rules are broken and bent to fit an agenda of buying more time.
Just looks to the Eurozone crisis over the past eight years – if not in the letter of law, then in spirit, every single criterion of the EU treaty has been violated by the need to “keep the show on the road”. No, the conclusion has to be that there are no independent central banks anywhere! There are some who pretend to be, but not a single one operates in true independence.

cb hands tied

 Let's get real — central bankers aren't autonomous. Pic: Jakob Ammentorp Lund
That’s the reality of the moment. I would not be surprised to find that the Swiss Government overruled the SNB last week and the interesting question for this week is of course if the German government will overrule the Bundesbank on quantitative easing to save face for the Eurozone? Probably….
The new dimension of central banking is the “communications policy” which is not only the poorest policy but also only really a front for “talking the market into believing our dream” without any further action.
Look at the Federal Reserve forward-looking guidance: They are constantly over-optimistic on growth and inflation. Constantly. The joke doing the rounds is that to get the proper GDP and inflation forecast you merely take the Fed's own forecasts and deduct 100-150 bps from both growth and inflation targets and voila! You have best track record over time.
Studies shows that the business cycle was less volatile before the Federal Reserves was born. The birth of the Fed meant leverage (gearing) which of course has resulted in bigger and bigger collapses of the economy, but with a trend of major crashes increasing in frequency: 1987 stock crash, 1992 ERM crisis, 1993 Mexico “Tequila crisis”, 1998 Asian crisis and the Russian default, 2000 NASDAQ bubble, 2008 stock market crash, and now 2015 SNB, ECB QE, Russia and China and what's the next crisis?
I don’t know, but clearly the world of finance and the flow of money is increasing its velocity meaning considerably more “volatility”. By the way, the only guarantee I issued at the end of 2014 looking into 2015 was:

main themes

 Where does this all bring me? The SNB's action was really the culmination of bigger and bigger moves at the end of a low volatility paradigm. I have been trading currencies for more than 30 years, Thursday’s move was single biggest move I have experienced in one market. But let’s look at other remarkable moves this year:
Oil has dropped more than 50%
 Source: Bloomberg
Russian ruble falls off a USD cliff
 Source: Bloomberg
EURNOK had it biggest move in many, many years (15% in space of a few days)
  Source: Bloomberg
EURCHF move in comparison:
  Source: Bloomberg
Even overnight, the Shanghai index dropped more than 7% – the biggest move in years on margin calls:
 Source: Bloomberg
The lesson is clearly that the market has been trying to tell us for a long time that volatility was a function of an economic model of suspending the business cycle. When you suspend an economic system such as the world markets for an extended period you ultimately release more energy when the business cycle starts anew.
We started the year with Maximum Dislocation of the market in a model of planned economies. We have bond and credit spreads at historic lows, currencies at extremes, equities and real estate in bubble-like valuations, and a geopolitical risk which keeps rising as seen this year in Paris, last year in Ukraine and also the rise of ISIS.
The US dollar is putting pressure not only on US itself but also the world. A journalist asked me last week: Who benefits from a stronger US dollar?  I still owe him an answer because very few benefit. In fact the world has two growth engines: The US and emerging markets. Both are pretty much US dollar economies. Debt (US dollar funding) in EM has exploded to an extent that many including the World Bank now call a for risk of “Perfect Storm in EM”. Both US and EM became credit junkies over the QE-to-infinity era in the US. The law of unintended consequences.
Another unintended consequence was that energy was the trigger for the crisis in 2008 as rising energy prices took five trillion US dollars out of the economy – which became the catalyst for the Eurozone crisis and US banking bailout. Now eight year later the drop in energy has broad spillover effects as the wealth is transferred from sovereign wealth funds in resource countries to consumers. 
That’s good for Main Street and bad for Wall Street as the “bid” in the assets disappear as these sovereign buyers needs to draw down on their wealth instead of buying overseas assets. Similarly, will a direct impact from SNB not having a floor be less NASDAQ buying which famously SNB had in its portfolio?
Meanwhile the fact that volatility is rising, the fact that we see early signs of the business cycle being activated, is good for the real economy. It’s a sign of money flowing from the 20% QE induced overvalued listed companies to the 80% SMEs (the real economy) as increase in volatility will make expected return less in “paper money” and more attractive in tangible assets and good business.
The world should be concerned when volatility is too low, it’s a sign of the market not allocating money correctly. The one lesson everyone needs to learn is that for a market based economy to function you need to allocate capital to the highest marginal real return of capital. Not to the most politically connected.
When history of 2015 is written I have no doubt that the Paris terror act and SNB's removal of the floor will stand out – both happened less than two weeks into 2015, although that is random, what is not random is that market volatility has been rising directly and indirectly through a misallocation of capital directed by the central bank system.


 Endgame for central banks – no more tools, no more options. Pic: iStock
Many central banks will envy the SNB for its move last week, as it at least tries to regain some control of its future, but the conclusion remains: central banks have as a group lost credibility and when the ECB starts QE this week the beginning of the end for central banks is completed. They are running out of time – that’s the real real bottom line: the SNB ran out of time, the ECB will runout of time this week, and the Fed, Bank of Japan and the Bank of England ran out of time in 2014.
What comes now is a new reality – the SNB move was a true paradigm shift – we can no longer look at central banks, the markets and extend-and-pretend in the same light as we did last Wednesday (the day before the SNB pounced).
The king is dead, long live the King.

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Pool Shark's picture



Author not write to good.

Need to work on speaking the English...


Clint Liquor's picture

Russian Ruble falls off a USD cliff

Methinks, it was pushed.

pods's picture

Poor Central Bankers.  Is that what we are supposed to get from this?


Haus-Targaryen's picture

Still really looking forward to "Fox and Friends" telling their 4 viewers that "no one saw this coming" the day after the crash.  


Arius's picture

mistakenly i thought central banks have been historically private ... silly me. 

those politicians we elect in office seems to be the ones ...

in final analysis, we have none to blame but ourselves since we elect them ,,, and so on... thanks Saxo bank

Manthong's picture

Divert, deflect, delay and deny..

Oh, you’ve just got to really feel for those poor central bankers who are just puppets of the politicians..

Who are just puppets of the lobbyists and special interests..

Who are just puppets of the bankers and financiers..

Who own the central banks.


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.

Keyser's picture

Central Banks are under the control of politicians? Bahwahahahahahha... He told a funny... 

MillionDollarBonus_'s picture

We need monetary union now. It's time for those who care about the global economy to stand up and say enough is enough.


  • We want jobs
  • We want economic stability
  • We want access to cheap credit
  • We want consistent investment returns
  • And most of all .. we want our freedom


If you believe that a global governing body that answers to and repreesnts the people is the only answer, then stand up for your rights NOW and put an end to this madness!

Bananamerican's picture

Nobody does snark like MDB.
Reels in more ZH suckers than any other chain puller around.
And all because he doesn't wink.

By the way,
What if Bankers and Politicians BOTH think they are the real shot callers while, behind the scenes, Satan laughing spreads his wings? Oh Lord yea-uh.
The penultimate divide and conquer would be to divide and conquer the "divide and conquerors"

Herd Redirection Committee's picture

Wow, this dude is deluded to think CBs are beholden to politicians...  Politicians are just the convenient middle-man, the lackeys of the bankers! LOL...

aPlayer's picture

Why does ZH publish this rubbish? I mean, did we actually learn anything from this article?

Heavy's picture

Agreed, it's like those Ramirez cartoons, distracting, off topic, and ultimately useless.

Ima anal sphincter's picture

Major central banks claim to be independent, but they are totally under the control of politicians.

What?????? That's the biggest joke I've heard in a long time. My reading stopped right there.

Raging Debate's picture

aPlayer - There may be nothing new under the sun but I am glad to see this article posted. It is telling where we are in the cycle.

My prediction for 2015 - Epic finger pointing and this article is just the beginning. Oh yeah, umm deflation.

The good news? There is only a few more bites left of the big shit sandwich. I am optimistic about mankinds future but this last portion of the cycle is reaching it's ugly conclusion and for most, it isn't going to be pretty.

Mitzibitzi's picture

I think the truth is more complex than that, actually. Most of the time the banksters are calling the shots, of course, but governments typically have military, police and intelligence services that can bite the banksters in the ass if they don't largely go along with the collective narrative decided on by all of the above.

As far as I can see, they are all part of the same wolf pack, gazing hungrily at the sheep grazing below, but there are still constant fights over exactly who is where in the pack hierarchy. Doesn't stop them being fucking wolves, of course.

oldschool's picture

MDB is good. I suspect he's really Sacha Baron Cohen.

eatthebanksters's picture

I like the authors statement that the market is not allocating money correctly...what market?

jerry_theking_lawler's picture

This is even funnier....what money?

Charming Anarchist's picture

Who is we? 


<<We want...  We want...  We want...>>

Carpenter1's picture

Bankers see the guilotines coming, time to find a scapegoat.


"Central bankers are puppets of politicians." 


Bull shit. They're puppets of bankers. 


What we have shaping up is the end game blame game, which ALWAYS pits politicians versus bankers. Once this comes, they're no longer unified, therefore they will fall.


We are right at the door folks, things are going to get downright biblical from here onward.

UncleSparky's picture

I think Ali G (SBC) is too busy fighting Da East Staines Massiv.

Not for American consumption "Coz I is black"

Save_America1st's picture

This SAXO guy is a fucking douchebag sociopath just like all the rest.


So I'll just be the first to welcome him to Zerohedge with a Laurel and Hardy:  FUCK YOU, STEEN JAKOBSEN!!!


There just may be a nail gun in this fuck-tard's future.



and I would like to thank the Tyler's for posting this sniveling weasel's laughable "article".


It should be the biggest joke on ZH all day today.


LawsofPhysics's picture



Let's be clear, it takes a lot of money to get and stay "elected".


Please, the CBs OWN the political class!!!!!!!!

Roll the motherfucking guillotines, starting with this asshat.

mkkby's picture

Yeah, Steen is just the latest asshole in a long string predicting the end game for central banks.  If we've learned anything, it is that they'll NEVER run out of ways to commit fraud and steal from main street.  Only guillotines can stop it.

michelp's picture

"This SAXO guy is a fucking douchebag sociopath just like all the rest."

Well it takes one to know one.

LawsofPhysics's picture

The people who have profitted from all this fraud are still have power and control.

Only one thing is crystal clear moron.  They will not indict themselves or give up that power and control willingly.

Impress us, bring the first guillotine to D.C., and we will join you.

"Those who make peaceful revolution impossible will make violent revolution inevitable."  -- JFK

Tick tock, time is running out to mkae sure we get the right people.

PTR's picture

MDB, you forgot your /sarc tag.


If you didn't, that song on the fiddle fools no one here.

indygo55's picture

 "we may be forced to set up a global governing body with the power to override the decisions of the nation states."

And who would chose those individuals? Well the existing PTB of course. Right? To maintain the status quo. Right? Isn't that who you work for?

nakki's picture

Manthong is correct. Pimps already blaming the whores for their problems, with the rest of us just mop boys cleaning up the goo left on the floor, at the peep show.

shovelhead's picture

Those guys should be featured on "The World's Most Dangerous Jobs".

bullchit's picture

Oooooh.....somebody poke my minds eye out...
AAaandd it's gone. Manthong that is.
Tyler the captured.
Little bit of truth....and loads of bollocks.
What a cunt. Enjoy your lucre...


bullchit's picture

The original Tylers must be turning in their graves...


FreeMoney's picture

This could not be more true "banana hammick"

Especially when combined with:

the national and internation complexity of transactions

the complicity of the press

the dumming down of the populace

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.

css1971's picture

Stop it man. You're giving me the heebie jeebies.

deflator's picture

 I have heard that China is very nationalistic...nationalism isn't just for White guys with little black mustaches. 


 besides, we already have a unified global monetary policy based on the USD. Why do you think a similar replacement with a different name will be acceptable now that it is clear that its predecessor has failed? When Fiat money dies it is never immediately replaced with a new confidence game Fiat. Failed Fiat is always replaced with something with physical collateral backing.

Milestones's picture

Yep--'Little inconequesial item "Loss of sovereignty"; the main reason I said 15 years ago that the EURO would fail and with it the European Union was doomed from the start.

It should be apparant to anyone able to read and think at the same time that merging countries B.S. is contrary to what is happening all over the world, People want a smaller managable unit to live in, Certain to break up is the USA--we are and have been moving unconscieously to that position.

One again all the so call brain people (Tribe) have got it all ass backwards. Force and bullying is their answer to everything.       Milestones

LawsofPhysics's picture

Retribution motherfucker!  Without it, nothing changes.  FYI, the chinese are very nationalist.

Reaper's picture

He craves a messiah to save his crony bankers.

froze25's picture

The more we have moved towards globalism the more our standard of living has decressed.  Centralization of power has not been benificial.

sherryw's picture

MDB - very dry sense of humour!

Late onset ADHD's picture

wrong bus again mdb?... ask the bus driver for a transfer slip... he'll pin it on your shirt for you so you can find your way home...

El Vaquero's picture

Central bankers may be controled by politicians, but politicians are controled by oligarchs.  Remember, Ted Cruz is married to a Goldman Sachs investment banker.  Now, if only we could get the list of who actually owns the Fed...

KnuckleDragger-X's picture

If you follow the money it takes to some strange places.....

Save_America1st's picture

Jim Willie has been saying for a year that the Chinese now own the Fed.  He says they own JP Morgan too after they bought JP's building last year.  Which is also has connected vaults below to the NY Fed.  He says our Fed has defaulted on gold lease deals w/ the Chinese and so the Chinese now control them. 

Wierd shit....