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Central Banks Are Beginning to Lose Control
Since 2008, the Keynesians running global Central Banks had always suggested that there was no problem too great for them to handle. They’d promised to do “whatever it takes,” to maintain the financial system and print the world back to growth.
Thus far, we’d seen some pretty aggressive moves. The most aggressive was committed by the Bank of Japan, which announced a single QE program equal to 24% of Japanese GDP in April 2013.
However, the SNB was the first Central Bank to actually reach the point at which it had to decide between printing a truly insane amount of money relative to GDP (50%+) or simply giving up.
It chose to give up.
In many ways, the SNB was cornered by the ECB into this situation. I think this is why the SNB decided to make its announcement on a Thursday as opposed to over the weekend (when Central Banks usually announce bad news to minimize the market impact). The SNB wanted to cause mayhem, likely because it was frustrated by the ECB’s upcoming QE program of which the SNB was undoubtedly aware in advance.
This situation has since progressed with an even larger, more important Central Bank buckling to market forces.
That Central Bank is China.
As we’ve noted before, China’s economy is in tatters. At best it is growing around 3.5%. At worst it isn’t growing at all. And with its currency closely linked with the US Dollar (which is in a bull market) Chinese exporters were getting destroyed.
So what did China do? It chose to devalue the Yuan.
In short, a new player is in the global currency war. And it represents the second largest economy in the world. Having said that, we want you to take note of a few lessons from this situation:
1) There are in fact problems that are too big for Central Banks to manage.
2) Central Banks are in fact individual entities. True, they try to coordinate their moves, but when push comes to shove, it will be each Central Bank for itself. This trend will be increasing going forward.
3) Central Banks have no problem lying about the significance of a situation right up until they shock the market (both the SNB and the PBOC’s moves were suddenly announced).
Of these, #1 is the most important. Since the mid-‘80s, the general consensus has been that there is no problem too great that Central Banks cannot fix it. This has been the case because most crisis that have occurred during that period were either isolated to a particular market (Asian Crisis, Latin American Crisis, Russian Ruble Crisis, etc.) or a particular asset class (Tech Bubble, Housing Bubble, etc.).
This situation has resulted in less and less volatility in the financial system, combined with increased risk taking on the part of investors. As a result, the necessary deleveraging has never been permitted to occur and the financial system has become increasing leveraged (meaning more and more debt).
You can see this in the below chart revealing total credit market instruments in the US (this only includes investment grade bonds, junk bonds, and commercial paper). The deleveraging of the 2008 crisis which nearly took down the entire financial system was a mere blip in a mountain of debt (and this doesn’t even include US sovereign debt, emerging market debt, derivatives, etc.).
Today, when you include global debt issuance, we are facing a debt super crisis, the likes of which has never existed before: $100 trillion in global bonds, with an additional $555 trillion in derivatives.
Central Banks, by printing money, began a war of competitive devaluation in 2008. This worked fine when they were coordinating their moves to prop the system up from 2009-2011. We even had some coordinated efforts by the Fed and the ECB to push the markets higher in 2012 in order to benefit President Obama’s re-election campaign.
However, 2012 marked the high water mark for Central Bank intervention without political repercussions. From that point onward, all Central Bank began to lose their political capital rapidly.
1. In Japan, the Bank of Japan’s policies are demolishing the Middle Class. The number of Japanese living on welfare just hit a record and real earnings and household spending have been in a free fall since the middle of 2014.
2. In Europe, the ECB’s President Mario Draghi has admitted in parliament that he was concerned about a “deflationary death spiral” and admitted that QE was the last tool left. Half of the ECB’s Board is against his direction.
3. In the US, the Fed is now being targeted by Congress. Legislation has been introduced to audit the Fed AND force it to abide by the Taylor Rule.
4. In China, deflation is spiraling out of control with a stock market crash, housing bubble bursting, and economic downturn that is more serve than most realize.
The significance of these developments cannot be overstated. Central Banks will be increasingly acting against one another going forward. There will more surprises and more volatility across the board. Eventually it will culminate in a Crash that will make 2008 look like a picnic.
Smart investors are preparing now, BEFORE it hits.
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Japan will nuke themselves before they walk away from their debt.
wait they already tried that, it was only partly effective. They are however restarting their nuke program so they still have a chance.
Central Banks have been expanding the money supply and had their foot to the floor yet economies across the world are not even close to escape velocity. Lessons from the "Financial World" are being doled out rather rapidly these days and it is best to pay close attention.
A very strong case could be make that a slew of new tools added the the central banks' tool boxes have masked and distorted the economic landscape. This can be seen in the explosion of derivatives, more debt leveraging, and in the growing carry trade. It is a fact that unproven tools can produce damaging results when not prudently applied still efforts to "extend and pretend" seem almost unlimited.
Many people thought Modern Monetary Theory (MMT) was to be our salvation and a tool to even out economic cycles but instead it has morphed into a massive dept machine. While those in charge appear undaunted by what is occurring the fact is by a series of off-book and backdoor transactions they have transferred losses from the banks onto the shoulders of the people. The article below explores the lessons to be learned from this experiment.
http://brucewilds.blogspot.com/2015/08/lessons-from-financial-world.html
the debt jubilee is spoke about in the bible and I think it rotates around a 50 year cycle. I agree that its really the only solution - but it will never happen... they will NUKE us first.. indeed one would wonder if that would be a preferable option to the "elite"..personally I think they are really uncomfortable with the fact that there are 7 billion useless eaters on this rock.. consuming up all their nice'ies
anyway ... im all in on gold... I seen a lovely villa in south of France last week that i want to consume
https://www.karatbars.com/landing/?s=ramgold2206
(Sigh)
Yea I can tell by the fifty point reversal to the upside today in the spoos on rumors of moar QE that the central banks have lost control and no longer influence the 'market'...
The central thieves are not losing control, but their game of dollar hot-potato is heating up.
Liberty is a demand. Tyranny is submission..
6 years on and Graham Summers still here selling doom and gloom along w ZH...
If you want to know who reads all this crap, just look at all the ads popping up on this scumbag site. Those written for the sheep, they'll click on every single one. And they will...lol
First, only a truly well-trained sheep doesn’t know, that adds are directly targeted to the individual. Meaning if you see a lot of ‘sheep’-adds it must be because your ‘online-marketing profile says you’re a sheep’.
Second, why don’t you use add-blocker software?
Third, I hope you’ll wake up one day and join the global awakening going on.
What ads?
indeed, there is so much blank space on my page I should sell some.
And you could secure that with some mortgages or auto loans. I think you're on to something.
This coming from some fucktard who I have never heard from before. Member 4+years? My ass. Beat it, get on back to Huffpo, lol.
"1) There are in fact problems that are too big for Central Banks to manage."
That's giving CB's way too much credit as they don't manage any problems, but rather cause them.
It's kind of like saying, "There are some racial issues that are too big for the KKK to handle."
The situation sucks but is FAR FAR FAR from collapse yet, the regimes have a lot more potential for debt + money creation & debasement. When the global ponzi fraud does crash, you had better have good survival skills, weapons and lots of ammo to survive - PMs won't help you.
gold & silver= no counter party risk.... everything else "paper" = debt
Its blindingly obvious why this is not part of the school curriculum....
They never had control. The greatest trick anyone ever played was when the babnks conviced everyone they needed to use said banks. We never needed banks, they needed us. But we chose them. This choice could be changed and people use gold and silver as money, thusly cutting out the middle man ie Fed.
We must make this choice now.
BUY SILVER
YOU are a scumbag.
How can you say that you are a free people when you have a central bank who decides who gets how much money when?
You cannot be a sovereign (freely self-governing) people when you cannot decide what money is and who gets it.
You cannot be a democracy when the government you elect doesn't control the issuance of money and gets its orders from the bankers, to look after the bankers' interests first and foremost, with the people's needs being a mere nuisance to them.
Unless you have a national banking system whose sole purpose is to serve the financial needs of the citizens, you are not a free people who decide their fate.
That is, you're all fucking Americans, fucking Europeans, fucking Chinese, fucking Indians, and fucking Russians.
You're just a blue fuck in a wet dream in some hell your dreams got wasted on.
You're fucking nothing.
Maestro - Correct the country can't continue a true Republic with a private Central Bank. You get the down arrow for telling the entire world's people they are losers.
Debt will be written off and this is going to affect the investment community for a number of years. We should have just ate the big shit sandwich all at once in 2008. The last few bits are especially nauseating with this current system.
Best man can do is build better brakes like a car. They always fail, we are human but nearing the end of our evolution.
God bless all people of all nationalities. So close to our final glory but yet so far... Around 2050 we have the tech to break free of human flesh and death. The short life and need to nut gather like a squirrel for old age is a big catalyst of behavior. Then you have competition baked into ourselves and those that win the vagina lottery tend to win here on this plane.
Take care of one another! No religion required.
Interesting scents emanating from your general direction, Raging Debate.
I gave you an "up arrow",
but,
I have no idea where it went.
coming from an expert in nihilism? not that I disagree with your points...
but tell us how you really feel...
I feel that is a very stupid statement to make.
just curious
what are YOU ????
Not one of the above.
Lighten up Francis, you're just as much of a slave as the rest of us plebes.
To whom are you addressing your post? Everyone not you?
This is the crisis we all knew would come when they established a debt-based currency in 1913. I read all these analysts clucking about how Keynes is a bum and no central banker knows what he is doing and how everyone wants to buy a new TV without saving for it. Yet when your currency represents nothing but debt and debt can never be paid off, only rolled forward, there comes an end-game scenario. We are there now. There will be no deleveraging because the banks who own all the debt will never relinquish their control over us. They didn't spend 100 years spinning this web of debt only to let it all go without a fight.
The reality is that you can only push a burgeoning debt-pile forward so far before you can't push it anymore. No analyst wants to talk about how we all got conned into this debt disaster and none want to talk about how we get out.
We have two choices:
1. Declare a debt jubilee, abolish debt-based currency, arrest the bankers and live well, or...
2. Resign ourselves to lives where the bankers steal everything not nailed down. We'll put on our chains of bondage and lie down to die.
Declare a debt jubilee, abolish debt-based currency, arrest bankers
Resign ourselves to lives where the bankers steal everything not nailed down. We'll put on our chains of bondage and lie down to die.
I put your choices in such a way people can vote for them. Go ahead everybody! It will not change much but it will make you feel better.
Arrest the bankers? Oh, no. no. no. Thats being WAY to good to them. Way! Way! Way! too good.
Worth signing in to upvote you..whoever you are ..congrats.
DR. Snooz, there is a third way which the American Monetary Institute has drawn up legislation once championed by Kucinich. It would work to get us past the debt pile and could then be modified as all new systems usually need some tinkering to function properly. Also known as the "Chicago Plan" ("revisited" typed in will bring it up on screen) championed by former IMF and now BOE economist Michael Kumhof. This follows somewhat the same method as outlined by Bill Still in his "Money Masters" documentary by returning money issuance to the public etc.. Steven Keen's system would work nicely but I can't see a way of getting there from here.
Great Statement! I agree completely! When you consider all the unfunded liabiities in addition to the "debt" secured with Bonds, it becomes obvious there is no man made solution available to pay it all off.
ONLY a DEBT JUBILEE will do.
I think it would be worth fixing the title so it makes grammatical sense.
Just saying...
One would think that they would at least proofread the headline...