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A Very Unexpected Statement From A Central Banker: "We Are Merely Reacting To A Situation We Did Not Create"

Tyler Durden's picture




 

The ECB's Vitor Constancio, while largely a silent puppet operating quietly in the shadow of his boss, former Goldmanite Mario Draghi, is best known for his tragicomic statement from October 2014 that the ECB will not stress test Europe's banks for deflationary scenario because it simply won't happen...

My question would be on how credible these tests are. Looking at the adverse scenario, you haven't even included deflation. You have not included an interruption in gas imports to Europe. You have not included full-on sanctions on Russia. So please elaborate and convince us.

 

Constâncio: The scenario for the stress test was published earlier in the year, so some of the things you mentioned would not have been considered. But indeed, what was considered is a severe shock being the growth of other countries. If you look to the scenario, you see that for the US, there is also a big deceleration of growth which is part of the scenario and also for other countries that are the markets of the euro area. So that is embedded in those assumptions of indeed a big drop in external demand directed to the euro area. That's the first point. The scenario of deflation is not there because indeed we don't consider that deflation is going to happen.

... just two months before the same Constancio warned Europe would shortly have its first episode of outright deflation, and which was confirmed in the first week of January...

 

... precipitating the launch of Europe's own version of QE.

But while the general public is now largely used to central bankers' utter cluelessness when it comes to predicting even the most immediate future, just a few days ago the same ECB vice president uttered something far more confusing and perhaps troubling during the Annual Congress of the European Economic Association, on August 25.

Here is what he said:

Sometimes the criticism directed at our policies implicitly attributes responsibility for the low interest-rate environment to central bank policies. But the truth is precisely the opposite: central banks are simply reacting to and trying to correct a situation that they did not create. Indeed, medium and long-term market interest rates are mostly influenced by investors and market players, as the recent so-called “bund tantrum” illustrates.

Huh? Suddenly central bankers are pulling the Obama 'defense' - it was all the "other guy's fault". But why? And if the current unprecedented regime of ubiquitous central planning is not the central planners' fault,  then whose fault is it?

Well, according to the same ECB comedian, it is the market's fault: the same markets that haven't existed since 2009 when the only "trade" was to frontrun, drumroll, the central bankers.

It gets better, because suddenly Constancio decides to completely lose logic and blame low rates on... low rates.

More importantly though, it should be pointed out that for a few decades now we have been witnessing a sort of secular trend towards lower real interest rates. This trend is related to secular stagnation in advanced economies, resulting from a continuous deceleration of total productivity growth and an increase in planned savings accompanied by less buoyant investment prospects. Monetary policy short-term rates are low because of those developments, not the other way around. At the same time, our monetary policy has to be accommodative precisely in order to normalise inflation and growth rates, thereby opening up the possibility of higher interest rates.

Actually, dear Vitor, the only reason there is secular stagnation now is because of the $200 trillion in global debt your policies have enabled: debt, which even McKinsey and the IMF, i.e., very serious institutional participants, admit needs to be washed away for global growth to have even a remote chance.

 

But the moment Constancio's speech jumped the printer was this:

Furthermore, in the present short-term conditions, with no fiscal room for manoeuvre, it is monetary policy that has the capacity to create the hope that this normalisation will protect savers in the future and improve net margins for banks.

Get this: a VP for a central bank... whose deposit rate is negative... which forces savers to pay the banks for the privilege of holding their cash... is suddenly concerned about "protecting savers."

One couldn't make this up.

The good news is that finally central bankers are scared: otherwise they wouldn't be deflecting public anger from their actions and blaming the "market" - a market which may have existed once upon a time, but in a world with $22 trillion of central bank liquidity is just a fond memory.

Here is to hoping that whatever is scaring these same central planners, finally forces them to admit what has been clear to most for the past 7 years: the money printing emperor has been naked from day one. And to finally leave and never come back, allowing this so-called "market" to return and wipe away 7 years of parasitic policies that have only benefited the top 1% of the population while crushing everyone else.

 

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Sun, 08/30/2015 - 17:47 | 6488200 phoolish
phoolish's picture

Bullsh-t

Sun, 08/30/2015 - 17:52 | 6488215 phoolish
phoolish's picture

Then raise the overnight rate to 6% immediately.

 

Sun, 08/30/2015 - 17:58 | 6488228 Pinto Currency
Pinto Currency's picture

 

 

ZIRP leads to a deflationary crash and currency failure.

It was created by the central banks - it wasn't imported from anywhere, it is not due to productivity growth, it is not because of the savings rate:

 

http://www.safehaven.com/article/38731/zirp-leading-to-economic-collapse-much-higher-gold-and-silver-prices

Sun, 08/30/2015 - 17:59 | 6488247 NoDebt
NoDebt's picture

"We are not in a liquidity trap."

Please keep repeating this phrase and believing REALLY REALLY HARD that it's true.

Sun, 08/30/2015 - 18:26 | 6488266 Manthong
Manthong's picture

"When it becomes serious, you have to lie"

https://www.youtube.com/watch?v=P4fEJIluuR0

edit: Hey troll(s).. like the CB executives don’t know it’s their very policies that have rigged the markets and are destroying the foundations of the world's economies?

WTF do you think “policy” and “fixes” are?

 

 

Sun, 08/30/2015 - 18:44 | 6488373 Arnold
Arnold's picture

Ve chust follo de orders, Ja?

Sun, 08/30/2015 - 18:48 | 6488380 turtle
turtle's picture

".. and improve net margins for banks." .... Isn't that a confession?

 

Sun, 08/30/2015 - 19:47 | 6488524 philipat
philipat's picture

It is intereseting only in timing that the CB's are now starting to deflect the blame for their own failed policies. But the alternative would be to admit that real problems are structural and lie with a corrupt and broken Western democratic/financial system which benefits only the 1%. Which is, of course, why a total collapse of the system possibly, and only possibly, represent any hope for change. These fuckers would rather collapse the whole thing and cause misery for all than admit they were/are wrong and surrender control of a lucrative ponzi.

Mon, 08/31/2015 - 05:49 | 6489385 MSimon
MSimon's picture

It vas der Chews. Ve haf veys uff dealing wit dem.

Sun, 08/30/2015 - 18:04 | 6488271 knukles
knukles's picture

I said it 3 times with my eyes closed, clicked my heels and still couldn't get there.
Maybe if I tried on my red sequined Liberace slippers .....

Sun, 08/30/2015 - 19:53 | 6488544 Attitude_Check
Attitude_Check's picture

Knuckles,  you HAVE to post a picture.

Mon, 08/31/2015 - 07:39 | 6489512 detached.amusement
detached.amusement's picture

Its a poverty trap

Sun, 08/30/2015 - 18:01 | 6488257 realmoney2015
realmoney2015's picture

Man (and central banks) cannot truly create. That's why man-made systems always fail. Man is imperfect, so all of his works have imperfections.

Free markets is just another way of saying God's markets. To believe man can control and sustain that the control of the markets is naive. Free markets will take over eventually.

Mon, 08/31/2015 - 01:33 | 6489269 The central planners
The central planners's picture

Let me correct this one: NIRP which forces savers to pay the banks for the privilege of holding their cash>  They are not simply holding it they are loaning it and having profit.

Sun, 08/30/2015 - 18:52 | 6488391 Enki Anu
Enki Anu's picture

Down with Khazarian Bankster Warlords and their Fake money.
Long live 6000year old GOLD.

Sun, 08/30/2015 - 18:17 | 6488304 DavidC
DavidC's picture

The chart of inflation is going down from left to right. All they need to do is plot DEflation ad hey presto! The chart will be going UP from left to right. Problem solved!

DavidC

Sun, 08/30/2015 - 19:59 | 6488561 SofaPapa
SofaPapa's picture

That is a brilliant idea!

They just need to memory hole the "deflation is bad" meme, point out how great deflation is ("we've always been at war with Eastasia...") and point out the tremendous success of their policies.

Now you're talking!

Sun, 08/30/2015 - 23:07 | 6489061 cheeseheader
cheeseheader's picture

Hey Costancio, buddy, you sound like this elitist dork:

https://www.youtube.com/watch?v=JMKu-n6yGKw

 

Jump to 6:30....

Sun, 08/30/2015 - 17:51 | 6488211 Tyrone Shoelaces
Tyrone Shoelaces's picture

They gettin skeert.

Sun, 08/30/2015 - 18:02 | 6488264 e_goldstein
e_goldstein's picture

They should be. There will be gallows in their future... and that's if they are lucky.

Sun, 08/30/2015 - 18:46 | 6488375 Arnold
Arnold's picture

Poverty first, then the punishment.

Sun, 08/30/2015 - 17:51 | 6488214 JoeySandwiches
JoeySandwiches's picture

"But while the general public is now largely used to central bankers' utter cluelessness"

 

LOL. I think the general public barely has a clue what a central banker is.

Sun, 08/30/2015 - 17:58 | 6488242 NoDebt
NoDebt's picture

Most of the population doesn't know what a BANK is.  They hit the check cashing store and head down to 7-11 for money orders to pay for shit.  Or they just wait for their EBT card to refill on the 3rd Tuseday of the month.

Sun, 08/30/2015 - 18:03 | 6488268 Pure Evil
Pure Evil's picture

Down here in God's Waiting Room they have a place called AMSCOT where you can walk in with your meager weekly wages and have them pay your cable and utility bills.

Banks!? We don't need no stinkin banks!

Sun, 08/30/2015 - 17:54 | 6488223 knukles
knukles's picture

Huh?  A monetary condition a central bank did not create?  Really?
As in you gotta be fucking kidding me.
Asshole.  No wonder we're fucked!

Sun, 08/30/2015 - 18:03 | 6488269 KnuckleDragger-X
KnuckleDragger-X's picture

What? You don't believe in magic? Shame on you! Just remember, these are the people everybody claims is running the conspiracy and while there may be one, these ain't the people running it.....

Sun, 08/30/2015 - 18:09 | 6488284 Sudden Debt
Sudden Debt's picture

Wir habben es nicht gewust!!

 

Do you know what we do with people who can't comprehend what their actions create?

We put them in jail or the looney house.

It's typical behavior of a sociopath.

Sun, 08/30/2015 - 19:43 | 6488513 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Really, WTAF. Another tell (along with the war on cash) that these criminal charlatan insane CBs are completely in panic mode. What does a deer do when your Hummer is bearing down on them at night on some country road...it stands there and stares at the bright light coming its way and wonders how the sun could be rising so fast, no actual friggin' clue what's really happening

Sun, 08/30/2015 - 22:30 | 6488957 StychoKiller
StychoKiller's picture

Stick a bone thru yer nose and wave yer rattle in order to understand the Bankster mindset...

Sun, 08/30/2015 - 17:55 | 6488225 Ms No
Ms No's picture

We understand this terrible burden they bear, how about they just return the control of the money supply back to it's respective countries then so that they don't have to take any more undeserved blame for causing war and IMPOVERISHING THE ENTIRE DAMN PLANET!

Sun, 08/30/2015 - 17:56 | 6488232 q99x2
q99x2's picture
 "We Are Merely Reacting To A Situation We Did Not Create"

Dude you are headed for life in prison. That's all I have to say.

Sun, 08/30/2015 - 18:29 | 6488261 ThroxxOfVron
ThroxxOfVron's picture

FUCK this prison bullshit, q99x2.

NO WAY.

I'm not paying to feed and house these bastards for the rest of MY life.

MY intention is to mop this up quick and cheap.

I'll pay for A cap each TOPS.   ONE.   ONE.    -You understand?    They get ONE EACH.

IF I can figure out how to shoot more than one with a single cap then I'll economize.

Enough precious resources and time have been horrendously squandered already..

Sun, 08/30/2015 - 18:57 | 6488390 Arnold
Arnold's picture

http://www.zerohedge.com/news/2015-05-13/north-korean-defense-minister-e...

 

Ok,smaller caliber, i get it. We have a budget all of a sudden.

(disappointment)

Sun, 08/30/2015 - 19:23 | 6488456 ThroxxOfVron
ThroxxOfVron's picture

"We have a budget all of a sudden. "

 

Fuck you!

I was being generous.

Ok, Arnold: your new homework is to find:

1. a cliff somewhere with shark infested waters beneath... 

2. a very large wood chipper.

3. 300 buses or horse trailers.


Sun, 08/30/2015 - 19:28 | 6488480 VWAndy
VWAndy's picture

Rope is cost effective.

Sun, 08/30/2015 - 19:40 | 6488509 ThroxxOfVron
ThroxxOfVron's picture

It's the ladder to get to the top of the lamp post that is expensive...

Sun, 08/30/2015 - 19:43 | 6488517 VWAndy
VWAndy's picture

I know a trick for that.

Sun, 08/30/2015 - 19:34 | 6488492 Stormtrooper
Stormtrooper's picture

Bayonets were designed to do the job quickly and efficiently. Conserves ammo.

Sun, 08/30/2015 - 19:45 | 6488520 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

In the French revolution they said "we will strangle the last aristocrat with the entrails of the last priest"

Sun, 08/30/2015 - 17:56 | 6488233 buzzsaw99
buzzsaw99's picture

the funny thing is that nirp is the express lane to deflation. nirp causes fiat to disappear up its own asshole in bulk.

Sun, 08/30/2015 - 17:59 | 6488244 ThroxxOfVron
ThroxxOfVron's picture

"it is monetary policy that has the capacity to create the hope "

 

Am I the only one who is somewhat alarmed that someone in Mr. Constacio's position would even articulate such a concept?

Monetary policy to create HOPE ?

WTF?

HOPE FOR WHAT?  

HOPE FOR WHO?

We just can't hang these bastards soon enought...

Sun, 08/30/2015 - 18:02 | 6488262 NoDebt
NoDebt's picture

You don't feel hopeful when CBs print money for their banker buddies but you get 0% on your savings account?

Hey, look at the bright side.  The interest rate on your credit card went down, right?  No?  Still at 18%?  

There's gotta be a pony in here somewhere.  We're just not looking hard enough.

Sun, 08/30/2015 - 18:07 | 6488277 ThroxxOfVron
ThroxxOfVron's picture

I think I've looked hard enough...

No.  No.   NO pony...

 

Time to clean house.

 

 

Sun, 08/30/2015 - 17:59 | 6488248 knukles
knukles's picture

I know people just entered rehab that can figure out stuff better than this shit.
Where the hell do they find these folks?

Sun, 08/30/2015 - 18:13 | 6488293 sbenard
sbenard's picture

Easy! They just look for anyone with HUBRIS as their middle name!

Sun, 08/30/2015 - 18:19 | 6488313 DavidC
DavidC's picture

Spot on knuks!!

DavidC

Sun, 08/30/2015 - 18:00 | 6488251 F0ster
F0ster's picture

Hang the bankers

Sun, 08/30/2015 - 18:02 | 6488259 anonymike
anonymike's picture

Ahhhh yes, the season for tyrannicide is nigh.

Let justice replace JustUs for a change.

Sun, 08/30/2015 - 18:09 | 6488253 anonymike
anonymike's picture

"create the hope (because all is lost) that this normalisation will protect savers IN THE FUTURE (fingers crossed) and improve net margins for banks (NOW and forever)."

It's now officially confirmed that central banks created the "situation" (understatement of the century), first with a quivering denial, and then with this admission of why they did it.

Sun, 08/30/2015 - 18:01 | 6488256 holdbuysell
holdbuysell's picture

Central Banks: your staffs are broken.

https://www.youtube.com/watch?v=0bG8CVUujhs&feature=youtu.be&t=11

 

Sun, 08/30/2015 - 18:03 | 6488265 Fuku Ben
Fuku Ben's picture

Mr. Constancio you may want to familiarize yourself with the publications and confessions of some of your global colleagues. Have you ever heard of former Federal Reserve Chairman Ben Bernanke, Mr. Takis Phedia or Dr. George Georg(IOU)?

http://www.zerohedge.com/news/2015-08-08/when-train-wreck-no-accident#co...

http://www.zerohedge.com/news/2015-08-17/greek-deposits-become-eligible-...

Sun, 08/30/2015 - 18:10 | 6488281 Ms No
Ms No's picture

Off topic, but damn!  Obama just renamed Mt. McKinley on a whim because why not?  That is cool for the Natives and all but how does he keep doing this? 

"The White House’s announcement did not specify how Obama and Interior Secretary Sally Jewell will assert authority to change the mountain’s name without approval from Congress."

Sun, 08/30/2015 - 18:14 | 6488298 Teh Finn
Teh Finn's picture

It's good to be the king.

Sun, 08/30/2015 - 18:18 | 6488308 kchrisc
kchrisc's picture

More fuel for tyranny's "division engine."

"Milk is up 20% because of the banksters' grift, and Zion's tyranny, and I should do something about it, but that will have to wait until after I get my hands on one of those damn Indians. Sheesh! Changing the name of a mountain. Nothing's sacred anymore."

Zion is a scheme, not an ethnicity..

 

If he, they, can command the changing of the name of a mountain, he, they, can command your forced encampment or death.

Sun, 08/30/2015 - 22:34 | 6488972 StychoKiller
StychoKiller's picture

Next up: "I command these tides to recede..."

Sun, 08/30/2015 - 18:09 | 6488285 sbenard
sbenard's picture

Correction:

"We Are Merely Reacting To A Situation We DID  Create"
Sun, 08/30/2015 - 18:11 | 6488287 kchrisc
kchrisc's picture

"We Are Merely Reacting To A Situation We Did Not Create"

Yup, because the people created the guillotines that will be chasing you maniacal thieves.

Zion is a scheme, not an ethnicity..

Sun, 08/30/2015 - 18:13 | 6488294 khakuda
khakuda's picture

It is inevitable that they blame others. They've caused two bubbles that have crashed already in the last 15 years. They did not take blame for either of those, even though they caused them. Because we are setting up for the next collapse, they are laying the groundwork so they can deny culpability this time as well.

Sun, 08/30/2015 - 18:18 | 6488295 Radical Marijuana
Radical Marijuana's picture

What is "unexpected" about the banksters' minions spouting blatant lies? Rather, indeed, "the money printing emperor has been naked from day one." The really relevant issues are to attempt to understand the history that resulted in the current situations where governments ENFORCED FRAUDS by privately controlled banks.

That is due to the political processes being dominated by the funding, in ways which match the principles and methods of organized crime. The social successfulness of that has resulted in the biggest forms of organized crime being governments, which are effectively controlled by the best organized gangsters, the international banksters. Central bankers work like organized crime works.

That situation has existed for generation after generation, automatically getting worse, faster. The deeper problems are that "money" made out of nothing as debts was being used to "pay" for strip-mining the planet's natural resources, Hence, the limits of the fundamentally fraudulent financial accounting systems are the limits to being able to continue to strip-mine the planet at an exponential rate. "... if the current unprecedented regime of ubiquitous central planning is not the central planners' fault, then whose fault is it?"

Answer via historian Carroll Quigley:

"powers of financial capitalism
had another far-reaching goal,
nothing less than to create a
world system of financial
control in private hands
able to dominate the
political system of
each country and
the economy of
the world as
a whole ..."

That system was "to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements. ...The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. ... It must not be felt that the heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up, and who were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks."

Sun, 08/30/2015 - 18:19 | 6488309 chunga
chunga's picture

If the term "compound fraud" isn't in the banker's dictionary it should be.

Sun, 08/30/2015 - 18:25 | 6488328 The Indelicate ...
The Indelicate Genius's picture

+ 100

Sun, 08/30/2015 - 22:44 | 6488932 acetinker
acetinker's picture

You have to wonder, if potheads etc. can see things that others just don't. I mean, the blatant abuse of entire societies seems so obvious-  I can't watch TV news anymore, it pushes my systolic above my abnormal normal of 175- I'm not kidding.  MD's don't wanna see me, 'cause in their minds I'm a liability.  Doesn't matter if I tell them I've been this way for many years... I'm not normal.

Actually, I don't mind at all being abnormal; it makes the morons around me all the more amusing- sometimes.

Other times, I just wanna throttle some ignorant self-absorbed asshole for no other reason than s/he is an ignorant self-absorbed asshole.

In other words, I feel ya'.  I appreciate what you do, and the information you attempt to convey- even if I don't say so often enough.

Thanks,

tinker

Sun, 08/30/2015 - 22:45 | 6488999 Radical Marijuana
Radical Marijuana's picture

Me too, acethinker: "I can't watch TV news anymore!"

Mon, 08/31/2015 - 01:32 | 6489268 acetinker
acetinker's picture

How many times do I have to reiterate- I am not an acethinker... I am merely a tinker who, if I dare say so myself, am pretty good at what I do.

As this summer began, my '01 Frontier shat its' timing belt.  It was my fault, I let it go (155k) too long.

So, I bought a '96 Accord from a dude (thinking my vg33e was toast) for short money because the dude had used a slide hammer to get the hub off the bearing... note to gen 4 accord owners... that's not how you do it.

Anyway, I got this accord for short money because the seller didn't know I could repair it for less than 30 bucks.

Then, one weekend, I began dis-assembly of the Nissan.  To my surprise, the timing belt wasn't broken- it had merely shed about a quarter of it's teeth

As luck would have it, the wife called Wednesday of that week to report that the a/c is not working at the homestead.  Obviously, this is a major problem.

Mind you, I'm working my ass off just trying to maintain my own enterprise- but none of that matters when wifey is uncomfortable.  No?

So, I checked the thermostat and the breaker.  Breaker's good, but thermostat says simply E.  It was on the wall when we bought the place, I have no clue what E means.

I go outside, and see that a section of paint on the outside of the condensing unit looks burnt.  That's not a good sign.

To make that part of the saga short, the capacitor had fried and in the process melted everything in proximity, including the wiring diagram and the contactor, not to mention the knot of wires..

I gotta give a shout to Fox Appliance Parts at this point.  I had ~1/3 of the capacitor and a melted contactor and a wad of melted wires that I cut loose from the evaporator.

iteratioArmed with new parts and a fundamental understanding of 220 single phase, I was able to make that A/C run again.

My li'l pickup is still in limbo, though.

Took two iterations to procure the correct belt, but by the following Sunday, she's spinning like a top.

Still, I am just a tinker, not a thinker

Sun, 08/30/2015 - 18:15 | 6488300 knukles
knukles's picture

The Man from Fractionalreservemageddon

Sun, 08/30/2015 - 18:23 | 6488322 The Indelicate ...
The Indelicate Genius's picture

imho

- don't take this as an indication that Central Bankers {and to an extent academics} are dishonest/lying.

Consider taking it as an indication they have no fucking idea what they're doing or that what they're doing is Potemkin Science in a completely artificial paradigm.

Sun, 08/30/2015 - 19:52 | 6488496 actionjacksonbrownie
actionjacksonbrownie's picture

They sure as hell DO know what they are doing. They are transfering your wealth to themselves and their masters. The only thing they are having trouble with is keeping all the fleeced sheep in the dark. The internet was the single greatest mistake tptb ever made. They never should have permitted a public network that essentially allowed the vast discemination of otherwise largely hidden truths.

Sun, 08/30/2015 - 20:44 | 6488696 acetinker
acetinker's picture

I was with ya' all the way to discemination. Sorry for bein' a dickhead, but spelin' iz impoortant 2 mee.

Sun, 08/30/2015 - 18:29 | 6488333 polo007
polo007's picture

According to Macquarie Research:

http://tinyurl.com/nnawrak

Emerging Markets vs Developed Markets Equities

What would the average opinion say?

Secular stagnation = no support for EMs…

- As Keynes highlighted, the secret of successful investment is anticipating what the average opinion of an average opinion would be. He also observed that it is better to fail conventionally than to succeed unconventionally. Thus there is always a strong desire to follow what appears to be a prevailing consensus. In the case of Emerging Markets (EMs) vs Developed Markets (DMs) equities, the view is forming that EMs are in secular decline and DMs should outperform. Investors are guessing that average opinion of an average opinion would concur. Do we agree?

- We have maintained for a number of years that EM as an asset class no longer exists, as all of EMs’ key engines (deregulation in DM labour markets; opening of product markets and massive rise in global shadow banking and associated leverage) are shutting down. Therefore we maintain that divergence would be the dominant trend and only those EMs that embark on domestic structural reforms would be able to grow (stealing growth in a stagnant environment), whilst those avoiding structural change would regress.

…this has become consensus, but is it right?

- We believe that over the LT, the consensus is right and global secular stagnation (due to overleveraging, overcapacity and structural shifts such as replacement of humans and shortening of supply chains) causes strong deflation, retards growth and is unlikely to unwind for years to come.

- Indeed, in the last six months, EM equities have already underperformed DMs by ~13% (US$) and investors witnessed significant increase in EM currency volatilities. In an environment of strengthening deflation and rising US$, EM headwinds could easily strengthen further, even though a number of EM markets and currencies are touching multi-year lows.

Long-term, yes, but ST depends on policy errors

- However, over a shorter-term horizon (six to nine months), the answer is not as straightforward. We maintain that as supply of global US$ remains tight (in the absence of QE4) and neither ECB, BoJ nor PBoC significantly increase monetary accommodation or provide meaningful stimulus (at least not in the near term), deflationary pressures should get stronger. As discussed here and here, after short-lived rebound, deflationary pressures are again rising.

- However, this assumes a persistent policy failure. Despite rising deflationary pressures, EM dislocation and signs of FX and debt pressures, Central Banks would procrastinate and avoid another dose of stimulus or perhaps Central Banks concluded that global economy is already in a liquidity trap and thus monetary policy is impotent. It is not clear which answer is scarier. Our view remains that apart from Japan and Euro, evidence is not conclusive whether other key economies have already descended into a purgatory, and hence we think monetary policies still matter. As deflationary winds strengthen, it is likely that Central Banks would panic. We maintain that possibility of QE4 into ’16 is real and we also expect a more robust stance by ECB, BoJ and PBoC. This implies that at some stage, investors are likely to experience a sharp (though short-lived) rebound in commodities, EM currencies and equities. The question is whether this snap-back is imminent and our answer is not yet. We need to see much greater pain before an average opinion concludes that snap-back is inevitable.

Sun, 08/30/2015 - 18:45 | 6488341 bnbdnb
bnbdnb's picture

You want to fix everything? Set the rate to randomly change between 0 and 10 every day. Talk about some FUN!

Sun, 08/30/2015 - 18:35 | 6488350 permarig
permarig's picture

That's pretty typical from them (as in 'them') in certain situations, i.e. trying to sell lies that are the exact opposite to the real situation. So like proof in itself they're creating it. Probably they know folks know more than ever what's up with these schemes, so maybe they're going to try portrait and position themselves accordingly. Let's see if we get more of this kind of talk.

Sun, 08/30/2015 - 18:39 | 6488360 ISEEIT
ISEEIT's picture

Totally sapio and actually quite beautiful.

Sun, 08/30/2015 - 18:51 | 6488389 VWAndy
VWAndy's picture

yep they are laughing at us. from behind a wall of stupid flippin sellouts.

Sun, 08/30/2015 - 18:53 | 6488398 Pipetex
Pipetex's picture

"We didn't do it, you see... we are such a nice group of folks, allways willing to lend a hand to our friends"

Some Beatles background music...

https://www.youtube.com/watch?v=jBDF04fQKtQ

 

Sun, 08/30/2015 - 18:54 | 6488403 agent default
agent default's picture

The bigger the lie the more you believe it.

Sun, 08/30/2015 - 18:59 | 6488406 The Indelicate ...
The Indelicate Genius's picture

.

Sun, 08/30/2015 - 19:02 | 6488419 VWAndy
VWAndy's picture

I know its only sunday. But is it too early to nominate this guy for scumbag of the week?

Sun, 08/30/2015 - 19:14 | 6488451 VWAndy
VWAndy's picture

We could give out prizes!

Sun, 08/30/2015 - 19:07 | 6488431 VooDoo6Actual
VooDoo6Actual's picture

Really ?

More smupid & smupidity deliberately. The Nerumberg defense "We were just following orders"

Bring in more Clowns

Sun, 08/30/2015 - 19:43 | 6488515 buzzsaw99
buzzsaw99's picture

central bankers have merely been following orders like good little nazis

Sun, 08/30/2015 - 19:48 | 6488529 bunnyswanson
bunnyswanson's picture

Predatory lending has a goal and this is it.  Predatory lenders were once only found on the seedy side of town, between Pawn Shops and girly bars.  Those with bad FICO scores did business at this establishments as a Last Resort.  The assumption is the loan will not be repaid, the payments will be jacked up with an ungodly interest rate and the collateral and this sum will be collected by these "predatory lenders" before the ink is dried.

Predatory lending is why Jesus Christ ran the bankers out of town.  And these bankers are made of the same cloth.  Our govt leaders who are paid with our tax dollars colluded with these bankers globally to destroy the middle class after transfer of its wealth, the Housing Industry equity in the US, the backbone of America.

 

KILL THE FUCKING BANKERS

Sun, 08/30/2015 - 20:25 | 6488620 Atomizer
Atomizer's picture

Many of us on Zerohedge know. Including myself. Be a man and fess up. Stop cherry coating the problem. Your family will be protected. 

I promise on my mother's grave. 

Sun, 08/30/2015 - 20:30 | 6488638 One Eyed Jack
One Eyed Jack's picture

"We Are Merely Reacting To A Situation We Did Not Create"

No hard feelings, just so you central bankers know; when it all comes down that is the same excuse that I'm going to use to you when I "react" to a situation that I did not create.

Sun, 08/30/2015 - 20:57 | 6488727 Atomizer
Atomizer's picture

Your right . I'm trying to be civil with these shady characters. It will end up as you stated. Invincibility is a gun shot away. Evil is not a badge of honour for turning around this globalization failure. 

How many times do we need to attempt the silk road fuck up?  

Sun, 08/30/2015 - 20:44 | 6488698 polo007
polo007's picture

According to Peter Tchir of Brean Capital LLC:

Why a 1,000 Point Drop in Stocks Means the Fed Should Hike

While everyone is rushing to push back their estimates of when the Fed will hike, I will go out on a limb, and basically beg them to hike in September (and not just because my current view of short equities, short treasuries might benefit). I also toss out a few suggestions for additional Fed governor roles, because of their expertise.

The main reasons for the Fed to delay are:

• Stock market volatility

• China and concerns about the global economy

• The deflationary pressures of China and the global economy

Of all the reasons given, stock market volatility should actually be a reason to HIKE not to delay.

The Fed, by talking up the market when it is down and talking down the market when it is up has created a volatility selling, dip buying mentality. We finally saw what that behavior can do in a short period of time. There were seriously discussions of 1987 over the weekend and part of yesterday. Stocks couldn't open. S&P Futures crashed to 1,830 on nothing. There was no liquidity. This all started last Wednesday after the Fed minutes.

They have potentially created a monster by causing mis-allocation of capital and rewarding certain investment behaviors which many not be the most prudent.

Hiking rates is always going to be a concern for equity markets. So here, you can say you won't hike, let stocks rally and in all likelihood create an even bigger problem down the road.

Or you can look out the window, see that the sun did indeed rise today, that stocks were trying to bounce long before China announced anything officially, and decide, that hiking rates when the S&P 500 is at 1,885 is better than hiking when it is at 2,100. There is more value at 1,800.

Quite frankly, I don't care if someone wants to panic and sell stocks because the Fed hiked a measly 25 bps. I am quite convinced that this Fed will remain data dependent. If the economy deteriorates after the hike, they will cut. Or they will do QE4. I still bet that we see QE4 before 1.00% of Fed Funds, but I think the right move is to hike in September.

Not hiking sends too many wrong signals to markets. Hiking clears the path for the real take off.

How much more comfortable would I be buying a rallying S&P 500 knowing that the first hike is off the table and been absorbed? The answer is a lot more comfortable. Once we can get past the zero bound we can lose this erroneous fixation on when the first hike is and think properly about the path.

So the Fed can sit in a room and wring their hands worrying about the next move in the S&P 500 clinging to models that have failed to deliver the results they expected, or they can raise rates.

My argument is that they need to attempt to deflate the possibility of a truly bad bubble developing.

On inflation - low rates and cheap capital certainly helped drive energy prices lower over time. Maybe a rate cut initially spurs inflation, but there is some evidence that over time it can actually be deflationary (by real economists and not just me).

On China - who knows what the actual situation is there. They overtly try and pump up the market. They will do what is right for China.

Nothing is permanent - hike and if it doesn't work, then do something else. But give it time. There is one school of thought that the first hike will actually create some impetus to starting projects and pull demand forward.

My three choices to add to the Fed would be:

• Madonna - she knows about "the first time"

• Tom Brady - he is good at slowly deflating things and winning

• Popeye Doyle - he knows that the only way to end an addiction is to lock yourself in a jail cell and go cold turkey

Sadly, the Fed is unlikely to listen to me, and they will use the current issues to delay again, but I think that is a mistake.

Mon, 08/31/2015 - 11:35 | 6490361 rex-lacrymarum
rex-lacrymarum's picture

The Fed should do nothing but abolish itself. There is no "better plan", although nearly every armchair planner thinks he has one. 

Sun, 08/30/2015 - 21:07 | 6488769 Gab Timov
Gab Timov's picture

reaction creates, too

Sun, 08/30/2015 - 21:26 | 6488807 Herdee
Herdee's picture

But underneath all the Eurpean debt lies a very high exposure of European companies to emerging markets.In my opinion the U.S. will suck the emerging markets dry of any money that's left.They're just getting started at it right now,so EU companies will take a bath.The economic scenario to me me looks like The Fed is desperate to create a rush of U.S. Dollars back into America in order to create inflation.You have the manipulated drop in commodities,now the massive printed fiat money supply that has been sent around the globe returns.It'll look like another China building boom coming to America if she happens to get out of control.

Sun, 08/30/2015 - 23:59 | 6489147 Element
Element's picture

 

 

More importantly though, it should be pointed out that for a few decades now we have been witnessing a sort of secular trend towards lower real interest rates. This trend is related to secular stagnation in advanced economies, resulting from a continuous deceleration of total productivity growth and an increase in planned savings accompanied by less buoyant investment prospects. Monetary policy short-term rates are low because of those developments, not the other way around.

 

Notice they never say upfront that debt is insanely high therefore the banks are sucking the economic life out of every dollar earned, making the economy relentlessly weaker, and stagnation (at best) is assured, until the debt is written down.

They pretend it's everything else but the debt level causing all of this, so won't admit that CBs are just lowering rates to stave off mass default, due to unserviceable debts.

i.e. "When things are really bad, pretend debt load to euros earned, just doesn't matter." - ECB

 

When of course it's the one thing that matters the most to real-economy health and resiliance.

Mon, 08/31/2015 - 06:49 | 6489440 GreatUncle
GreatUncle's picture

As the debt load grew they pretended the amount being borrowed was sustainable through their manipulated figures.

If those figures were wrong or outright deceit and far lower we walked into a debt trap where the level of debt iis rising out of control.

AKA Japan, not a cat in hells chance of bringing the deficit under control let alone the debt.

Mon, 08/31/2015 - 03:42 | 6489322 CHX
CHX's picture

Compounding positive interest rates very quickly lead to an exponential moon shot, so that is a no go in the long run. The fiat debt ponzi is on its deathbed.

Mon, 08/31/2015 - 04:18 | 6489345 Youri Carma
Youri Carma's picture

I don't like those guys. What guys? Guys like us.

Mon, 08/31/2015 - 05:22 | 6489372 falak pema
falak pema's picture

Said otherwise : We central bankers are the water carriers of our OWNERS, the Oligarchs and their crony politicians; the TBTF/TPTB cabal; who have created this mess, and whose hidden interests guide the overt moves we make via our printing press; aka we serve the 0.01 %.

 

Mon, 08/31/2015 - 05:59 | 6489389 Western Pig Dog
Western Pig Dog's picture

I smell fear.

Mon, 08/31/2015 - 06:42 | 6489432 GreatUncle
GreatUncle's picture

Whatever they were fighting they made sure every time all the economic policies they implemented would ensure they would be safe not the rest of us sheep though is that not right banker?

So whoever they wish to blame still enabled them to enact policies to feather their nests at the expense of the general population.

Mon, 08/31/2015 - 06:46 | 6489438 Raul44
Raul44's picture

I had really good laugh Vitor, NEXT!

Mon, 08/31/2015 - 07:25 | 6489485 Kokulakai
Kokulakai's picture

The only portion of "the $200 trillion in global debt" to be "washed away" will be deposit accounts.

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