One By One the Central Banks Are Losing Control

Phoenix Capital Research's picture

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. Also, the Fed appears to be losing control of the system as it failed to increase interest rates and stocks STILL collapsed.


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.


If you've yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.


We made 1,000 copies available for FREE the general public.


As we write this, there are less than 10 left.


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Best Regards


Phoenix Capital Research


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Hannibal's picture

ZeroHedge is no place for Phoenix Capital, so get lost and stuff your daily bullshit disinformation up your ass!

datura's picture

"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."

Well, this is interesting: 

US Bank "Citigroup" Moves GOLD & CASH Reserves to RUSSIA (where the Russian Central Bank took it for protection)

datura's picture

This is the history of Citigroup in Russia:

Citi's history in Russia began almost 100 years ago and is closely tied to the dramatic events that unfolded during that period of the country's history. Citi first entered Russia on the eve of the Revolution. In 1916, Citi, then-called National City Bank (NCB), underwrote bonds to support the government of the Russian Empire as World War I took its toll on the country's resources. Believing that Russia would soon emerge from the war and embark on a period of rapid economic development, NCB executives established a branch in Petrograd on January 15, 1917. Just two months later, the tsar was forced to abdicate, and a new, liberal government took power. Even as the battles raged in the streets of Petrograd, the bank established a new branch in Moscow in November.

By December, the new Bolshevik government had taken control of the major cities of European Russia. On February 3, 1919, the bank established a branch in the city of Vladivostok in the Far East, a meeting point for retreating soldiers and refugees. On March 13, 1920, all three branches were closed.

Between 1920 and 1970, diplomatic and economic challenges – followed by WWII and then the Cold War – prevented the bank from re-entering the country.

 In 1992, following the collapse of the Soviet Union and emergence of the Russian Federation on the global marketplace, Citi once again had the opportunity to open a representative office in Moscow. In 1998, Russia was hit by a financial crisis; although many other international banks left, Citi remained.

Jack Daniels Esq's picture

To to hang the 535 morons + Criminal-in-Charge + Yellen

MonetaryDigitalis's picture

No one ever had control.

starman's picture

Yeah but Hello Kitty is doing great in China! 

So there. 

Crocodile's picture

GET RID OF PHOENIX CAPITAL; like the Goldman Sachs gang, a black-eye to everyone on ZH!


If the Central Banks have lost control, then answer how is it ALL the markets are continuously rigged day after day after day?   The S&P is worth about 50% of its value, but because of CENTRAL BANK control; it is maintaining.  That is control stupids!!

nscholten's picture

Why all the hate?  Don't read the fucking thing then you moron.  It lays out the same or similar senerio as most other serohedge articeles with being somewhat of an easier and sometimes more concise.

jomama's picture


Phoenix901210's picture

But as ZH commented the VIX is losing it's 'mojo' and the signalling is getting less effective.

Phoenix Capital is basically repeating what ZH said in a recent post; Your complete guide to a world where the Fed is no longer in control.

That goes for all you morons on this thread. You just enjoy fanatically the feeling of 'doomdaying' and worshipping the elite through fear and talking about how they are so all powerful that there is no hope.

nostromo17's picture

Sickening Modern Delusionality...

The article like most is an article for its own sake. I view the Central backs not as losing control, but instead Central banks are now being exposed not to have the control they haven't had for two decades except for Capital Market Participants brainless conventional fools persisting in believing in the myth of the Fed for their knee jerk reactions.

Central Banks and their economists are no more than the disinformation tools absent any knowledge of actual economics  in place to spout lies about economies and idiotic  disastrous solutions cooked up to satisfy the greedy plots of the political corporate banker slime screwing everyone else and themselves in the end.

When the Mortgages collapsed along with commercial paper because everyone discovered that CDS hide who your actual credit risk was and at least %40 of false mortgage value the ultimate collateral in the U.S.A. and the biggest single world market home and commercial mortgages imploded, no one cared to accept that mortgages were hedgind in swaps and market size wise mortgages was about ten times bigger than the swaps market.  Capital markets then became a smaller incidental side show compared to the humongous disaster that just swallowed CM's and everything else.

It became evident too when it came to  mortgage hedgers pouring gasoline on a swap rate fire, that  no one was now any longer in control and short term rates are basically not able to be influenced by the fed and had no consequence  for long term rates either becasuse there were other instruments all over where those rates played out as well and seperately from the myth of 'Fed Control" markets and short term swap alternatives.

What a bunch of idiots. Every speck of platform and policy for at least 20 years is irrelevant because no one in power has a clue about anything erroneously believing their delusional self rationalizing self serving lies which have no relation to the underlying  events and political and social dynamics of growing corporate world fascism mismanaging everything for short term illusory gain.

But old dogs don't learn new tricks and the disinformation machine believes its own lies in the end and no one has a clue anymore what's going on. 

Except its obvious if you pretend to stimulate but deposit the Funds at the Fed for bank collateral nothing Keneysian will occur because no consumer receive money to purchased and its clear if you arbitrarily decide to keep rates low detaching them from price of risk and your target is a post 9/11 two or so percent which is zero net zero if inflation is the same level

THEN YOU REALIZE the stupid fucks in the Government and FED and banks PUT the U.S. into the DEFLATION that finally is showing itself in spite of all criminal parties efforts to disinform everyone about the truth.

Reality, the real economy (real in sense of not some delusional imaginative self serving lie) is peeking through the Cloud of Unknowing ignorance denial and Politically Correct Fascist oppression of reality. And this 15 year ice berg is freakin huge.

Any gain post WWII is more than vanished and erased. Welcome to the stone age. The cult of apatheticism will now pay the price for allowing the treasonous politicians and corporates to divest us of our governments, properties and freedom lying about imperialism for oil as spreading democracy, glablization and imperial colonialism and enslavement of the other not First Worlds.

And everyone who has felt almost nothing, same job forever, hasn't a clue and doesn't care and would rather believe in Ozzie and Harriet or something anything in appearance that belies the lie that the status quo is is ongoing and hasn't become erased history and and irrelevant. A whole workd lives in denial and does nothing about what they do not see voluntarily self blinded.

In denial of reality he problems are not seen and so they are not dealt with while careem into destruction with no one at any healm and no one having a clue whats going on. Sick PC denial fascism. Sickening. You want to believe everythings just fine then thats what I'll pitch while I rob you blind into a pauper slave for me.

Fun times.


TuPhat's picture

They haven't lost control yet but they are losing it.  I think it won't be long now.  There is no way to invest or play the market as this goes down.  There will be no winners in the market.  Those with the most power will take everything that's left and then they will have to fight to keep it.  Those who are furthest from ground zero will be the best off.

Hannibal's picture

I disagree with this article:

The so called "idiot" bankers are losing control, blah blah, is the perfect distracter (like proxy wars, Obummer, the Pope, migrants, refugees, chaos etc.). The world's Central Banksters are doing and getting exactly as planned, strengthening and consolidating their legal and financial control over the rest of us.

Don't under estimate these psycopaths.

nscholten's picture

And its okay to disagree.  Obviously the "no rate hike" had the wrong reaction and so the bitch came out and flipped to "everything is fucking grand".  And now markets can go up as they would have had she announced a rate hike.

tired1's picture

I agree. Every time the banksters do something unconscionable and illegal, I figure there will be consequences. Or, at least I used to. The game is far from over, the bloodsuckers aren't done. Besides, there's nowhere else to go. We live in epoch times.
On topic (as far as deep capture and 911 go) have a look at some of the info being provided about 911 by a former flight attendant. She's gone far in filling in pieces of the puzzle.
Web search: Rebeka Roth
FWIW: it seems to me that Americans are the least informed people on the planet. USA # 1 !