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Central Banker Urges Lying To The Public About Bank Health
For years, many - and certainly this website - had mocked both European and US stress tests as futile exercises in boosting investor and public confidence, which instead of being taken seriously repeatedly failed to highlight failing banks such as Dexia, Bankia and all the Greek banks, in the process rendering the exercise a total farce. The implication of course, is that regulators, thus central bankers, openly lied to the public over and over just to preserve what little confidence in the system has left.
Now we know that far from merely another "conspiracy theory", this is precisely the policy intent behind the "stress tests" - as Reuters reports citing a paper co-authored by a Bundesbank economist, "banking supervisors should withhold some information when they publish stress test results to prevent both bank runs and excessive risk taking by lenders."
In other words: lie.
Essentially the authors recommend instead of being a useful measure of banking sector health, all stress tests should do is boost skepticism in the entire financial system since bankers are too scared and too insecure to admit the full extent of the ugly picture.
Or, as Jean-Claude Juncker put it: "when it gets seriousm you have to lie."
Why is this emerging now, and is it, well, about to "get serious"?
As Reuters notes, European banking authorities are due to carry out a fresh round of stress tests next year as they try to restore investor and depositor confidence in the continent's banks after the financial crisis. So the answer is probably "yes."
The paper, presented at a conference in Mannheim last week but yet to be published in its current form, says stress tests should be used to influence depositor behaviour and warns against giving too much away."
Said otherwise, regulators should outright lie to the public. Why? "If depositors know from the watchdog that banks are in trouble, they will withdraw their cash, threatening lenders' survival and causing the panic the supervisor is trying to avoid, the paper said.
Perhaps someone needs to explain to the Bundesbank central banker what the word "regulator" means: a quick scan through the thesaurus does not reveal "liar" as one of the synonyms. That, however, is irrelevant: the authors push on saying that the amount of information disclosed by supervisors should decrease the more vulnerable the banking sector is expected to be.
"The optimal level of 'informativeness' ... depends on the objective probability that the banking sector is vulnerable," authors Wolfgang Gick, from the Free University of Bozen, and Thilo Pausch, an economist with the Bundesbank, wrote.
"As we find, the higher the latter probability, the less informative the optimal disclosure mechanism should be designed.""
It gets better: central banks should, the authors allege, also lie about healthy banks: "giving banks a clean bill of health also carries risks, according to Gick and Pausch, by encouraging depositors to leave their money in banks. That would undermine market discipline and lead lenders to take excessive risks, they wrote."
For that reason, supervisors should always keep depositors on their toes by maintaining a degree of uncertainty about the health of banks, the paper concludes.
Brilliant: so on one hand, supervisors should lie about failing banks, but on the other "they should keep depositors on their toes."
And the punchline: "The optimal stress-testing mechanism will leave depositors with some amount of residual uncertainty."
When asked the Bundesbank said the paper does not necessarily reflect its view and is based on a specific theoretical model, noting different settings may produce different results. The European Central Bank declined to comment on the paper.
But others promptly agreed with the liars, pardon, the authors:
Richard Reid, a research fellow in finance and regulation at the University of Dundee, agreed that giving extensive details could lead to even bigger problems and rob regulators of a window to rectify problems, or make it harder for policymakers to deal with wider issues like sluggish growth.
"It's an age-old problem for regulators, how much transparency there should be," Reid said. "There is an argument of 'let's flush it out,' but in the current situation the weak upturn is a key concern to central bankers, and if you spook markets about banks, then it might further complicate the provision of credit to the economy."
True: it's best to lie to depositors until the last minute, and when everything fails, to pull a Greece and threaten the country with civil war as Alexis Tsipras recently did unless the capital controls imposed on all depositors are implemented.
So to summarize: earlier today the "smartest ECB banker in the room" confirmed it was unable to predict the inflationary or GDP future as far ahead as just one quarter, and now the "regulators" are suggesting that any information coming from central banks will be nothing but lies.
And yet in this bizarro world where the smartest people are actually the dumbest, and those supposed to be the most honest are the biggest liars, the fate of everything lies in the hands of the Fed's decision whether or not to hike rates from 0.0% where they have been for 7 years, to 0.25%...
Sorry, The Onion, but your IPO window is now forever gone.
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The Costanza Paradox- Its not a lie if you believe it......
The first casualty in war is truth.
This article had to rely on twisting words and calling perception management lies. We all do it. We brush our teeth and comb our hair, take consideration for our outward appearance. To put this in a frame of reference for a ZH reader, perception management is as natural as passing gas and blaming the dog.
Your point is inane.
Just a silly as anyone else here pretending to be arbiters of truth. Only radicals view these matters as black and white, good vs evil.
There is a difference between data and the manipulation of data, I'll give you that.
The point here is that if you put 100 accountants in the room and just gave them the numbers, what conclusion would they reach?
If people understood the math there would be no global warming/cooling/climate change debate. None.
Science and math can be absolutes, just give me the numbers.
OK, so first of all, the banks are cooking the data and twisting what they report to the central bank. THEN the central bank further twists and manipulates it. TEHN they redact parts of it from public view. AND FINALLY, after all that they serve up the shit sandwich and call it foie gras.
Got it. Fine work, gentlemen. You're a credit to your profession. Die in a fire, you fucking dicks.
They are not lying! They are withholding certain truths.
Miffed;-)
Science and math can be absolutes, just give me the numbers.
Simple hypthoses/problems and even some seemingly complex ones - yes. But, unless you're God or some supreme higher being, I doubt you can crank out absolute answers for complex things like climate change, the global economy, evolution, and problems of that sort which literally have millions of variables/inputs. If you could you'd be a rich man (or be accident prone around nail-guns).
Not truth... facts. Try telling a building inspector who is about to revoke your occupancy licence for improperly storing 50,000 gallons of diesel in the basement of a high-rise apartment building that he needs to engage in perception management, lest anyone lose confidence in the owner's ability to provide safe and appropriate facilities... Responsibility and duty are black and white, just as facts are, and unlike "truth".
In a general sense? Maybe. In a regulatory position (especially one where you are hired by a 'goverment') where it is somewhat implied that your role is to analyize critical systems and produce and honest result? Sorry, No. The fact that so much of goverment is 50 shades of grey now and not more black and white is why they already get away with so much.
I undestand what you are saying, but there is a big difference between passing gas and blaming it on a dog and depositing money or buying bank shares based on fraudulant information. This also means that let's say uncle Shweinsteiger's pension fund can buy Deutche Bank bonds because they are told these are AAA, but one day these disappear. Money saved over decades, poof. And it did not disappear, the bank made bad calls on their bets and the deposit money is in Goldman's pocket or maybe stuffed in a greek mattress. Hence a very serious financial fraud occurs with that kind of lying where your bookies bet on your money using casino provided data.
The fart was the data. The dog was the third party rating agency. The flatulators are the banks but they can point the finger at the rating agencies and laugh. Just like that. Poof now its gone and repeat. If someone is fooled by bad data, aren't they just as responsible as the producer to understand the inherent risk? Can we stop blaming the banks and take personal responsibility for our misfortune? I think there is a serious lack of accountability and personal responsibility that nobody wants to address here at ZH.
Why listen to these idiots?. Jut forget about it and let them play their own games.
A kid in first grade can see that if you create something out of thin air, it cannot possibly have value.
Why bother with this mental anguish?.
Just upt out, buy gold and let the house of cards collapse.
Easy.
two can play that game,when i do my withdrawals,and they ask why..."yo,lost a bundle on that ball game last nite"
all's fair in love and doomsday.
Let's all be honest. Thanks to globalization, the earth has in fact been engaged in a "let the majority eat cake" monetary experiment.
I expect the final outcome will be no different than the outcome experienced by France in the 1700's.
Hedge accordingly...
It looks to be harder and harder to lie to ordinary people, who BTW, are not eating any cake. Cut out a few free lunches here and there and the match will be lit.
Just pull that double-decker with the 80 deities off a cliff.
That is how much leverage is floating around.
Basically we are in a bubble factory and this was the "remove all sharp objects from your pockets" line.
So much liquidity sloshing around looking for yield that good or bad news will destroy the system.
Got themselves in quite a pickle. Hope they don't "lose" their heads over this. Just kidding, of course I do.
pods
a Kosher Pickle?
Come to think of it, they are throwing salt on the wound
Here's a cheery article: (from the former OilDrum folks)
http://ourfiniteworld.com/2015/08/26/deflationary-collapse-ahead/#more-40089
At least I have my fall/winter garden ready to go
Again, let's all be honest, so long as there are 7+ billion people on this rock, deflation in anything that is required for a decent standard of living is a complete fucking myth.
I don't think you and Gail are that far off.
Her articles have gotten progressively bleak.
It is fascinating (and frightening) to watch the progression of panic? despair? in folks of various disciplines as they unpeel the onion and find out there's no core
7??
Make that 9!
Maybe not for much longer though!
I think Obama is lusting for a war, which he is too dumb to realize he will never, ever win.
If something smells bad, don't wait until you see the flames. By the time the MSM yells "Fire!" in the crowded theater [of the absurd] it will already be too late.
Aw, poor central banksters have lost all credibility and no one gives a fuck about them anymore, gee that's a shame.
Spawn of satan are allergic to truth
I think Satan would deny he's related
Lie to me but I'm checking your facial microexpressions
I'm sorry, but are we talking about something NEW here?
These stress tests are either distractions or farce.
IF the regulators were properly regulating they would know what is going on inside these institutions and not require stress tests.
For instance: The FED can see what is going where and when via the Fedwire.
They have quantitiative analysis of flow and aggregate deposts and withdrawls on a TBTF subsidiary basis sonce each institution has a distince routing number to cashe the info from on a transactional basis.
This is purportedly HOW THe FED "KNEW the system was melting down and was hours from terminal collapse" in 2008.
THe ECB and the other major CBs can't be without similar systems of transactional flow analysis via the same similar transaction clearance mechanisms.
IMHO, they are lying NOW and on a consistent basis..
Lie by omission. As banks and Politicians are bascially Midde men they only make money and gain power by changing the rules of the Information game.
Information today is the lifeblood of society. And information should be free!
If its not free we have a multi tier society based on "divine rights" not on merit!
Junker is drinking to much coffee.
This is news?
Why would banks care about stress tests and bank runs? Banks do not need deposits anymore. The central banks and international banks provide infinite liquidity.
Dr. Bernanke, & Mr. Geithner, really had no other way out of QE Infinity once they initiated it with TARP. It was either QE Infinity or a crash that would have levelled the entirety of the Western World banking sector in a matter of days after the Lehman Bros. debacle. They were faced with certain death, so they bought themselves, and their colleagues, time to think through the conundrum. Seven years of contemplative thought has brought us no closer to a solution because this is a problem that cannot be solved without a complete restructuring of the contemporary Economics system, and a Chapter 11 bankruptcy of the United States of America.
Damned if you do, and damned if you don't, but at least we know that America is damned with these kinds of managers at the helm.
"so they bought themselves, and their colleagues, time to think through the conundrum." -- complete bullshit. QE has done precisely what the real owners wanted and more, most importantly it has allowed the real criminals to escape with the loot.
Yep, all these central banksters knew exactly what was going on and had 7 years to plan for what they delayed so if they're still exposed that's their problem.
No, guys, don't you recall, the way a central banker "lies" is by forcing you to accept a twenty-five billion dollar (no interest) loan, whether you want it or not! That's what they did in 2008, so you couldn't tell which banks were in trouble and which were not.
So why don't "supervisors" supervise banks more closely, discovering and remedying bank weaknesses in between stress tests. In other words, why don't they just do their job. They could then disclose fully results of stress tests. Provided "supervisors" did their job, the only banks that would fail would be those who declined to reform or were too far gone and should fail. Operating in this manner would only increase credibility of regulators. Simple, no?
(cough) marketing (cough)...
They lie about everything. Why not lie about this?
"Guillotines. Guillotines. You on in six minutes. Six minutes guillotines."
Zion is a scheme, not an ethnicity..
According to MarketWatch.com:
http://www.marketwatch.com/story/panel-of-ex-fed-officials-say-no-rate-h...
Panel of ex-Fed officials say no rate hike will come at September meeting
Published: Sept 3, 2015 1:46 p.m. ET
By Greg Robb
Senior economics reporter
The global economic outlook has worsened since the Federal Reserve’s last meeting in July, which will lead the U.S. central bank to hold off on lifting interest rates in September, a panel of former Fed officials agreed Thursday.
The global economic situation has deteriorated and “not by a trivial amount,” said Joseph Gagnon, a former Fed staffer and now senior fellow at the Peterson Institute for International Economics.
Global stock markets are down 5% to 10% since the Fed last met, and the dollar is up 2% on a broad trade-weighted basis, he noted.
“The Fed has cultivated this recovery so carefully, with such enormous effort, for over the last seven years — are you really going to take the risk in this environment with unstable global financial markets and real macroeconomic questions about the global outlook that are not just about volatility?” asked Julia Coronado, chief economist at Graham Capital Management .
The former Fed officials spoke at a panel discussion sponsored by the Brookings Institution.
Jon Faust, a professor of economist at Johns Hopkins University and a former adviser to Chairwoman Janet Yellen, said Fed officials will delay, awaiting the “macrosignal” behind the recent market turmoil.
Donald Kohn, who served at the Fed for 40 years and ended up as its vice chairman, said two things would make him hesitate to hike rates if he were voting at the September meeting: very low inflation and low market expectations of a September move due to recent market volatility.
Kohn said he would want the Fed statement after its September meeting to stress that rates will rise before the end of the year. “That will help build in the expectation of higher rates later this year and put that in the markets, so when I finally did move it wouldn’t be such a surprise,” he said.
Fed officials have argued that the timing of the first rate hike doesn’t matter as much of the path of interest rates. They have stressed that the rate path is likely to be a gradual one.
Coronado took issue with this, saying it was “not entirely true for the markets that translate Fed policy.” A September move would be a “big surprise” and viewed as a “policy mistake,” she said.
Coronado said there were less than 20% chance of a rate hike in September. Gangnon, Kohn and Faust said the odds were higher but still less than 50%.
Not sure why this was posted today as "new" news. ZeroHedge did a story on Juncker's quote on the need to lie to people over 4 years ago.
http://www.zerohedge.com/article/head-eurogroup-admits-lying-about-secre...
It is now illegal in France to criticize their banks.
This gives an indication they know something they don't want you to know.
What's the big deal?
It is interesting that Central Bank lying is a story.
Because for it to be a story, a lot of people would have to not realize that central banking is fundamentally a confidence job... and lying is fundamental to inciting unwarranted confidence.
So...doubleplus good?
It's a mystery to me why anyone has any meaningful deposits in a bank above what is needed to pay monthly bills.
On the other hand, maybe it isn't so mysterious. The vast majority of people are "educated" in government schools. They are illiterate, innumerate and intellectually lazy. They have no idea what awaits them financially, because becoming informed requires a little independent thinking, a little reading, and a bit of common sense. The average American has none of these traits. He is an ignorant fool, but he will soon learn a very painful lesson about banking insolvency and that he was sacrificed to keep the banksters employed.
I have no sympathy for such morons. Fuck 'em.
Get in my belly!
The really big lie from the Bundesbank:
Austerity works.
They can lie to us but we can't lie to them? Gosh, I thought it's been this way for over 100 years!
Definition: "official authority" == LIAR.
In other words... no change for millennia.
Geez, how stupid am I? I thought they've been doing this all along anyway?
This (WWPPS) World Wide Paper Ponzi Scheme will only work well for "THEM" if the Mushrooms (people) of the world are kept in the dark and fed bullsh*t. "THEY" can't have the Mushrooms waking up and getting out of the Scheme and getting into "PET ROCKS".
_JOHNLGALT. Who is John Galt?