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Goldman Warns On Limits Of Central Bank Policy: "The Road To Hell Is Paved With Good Intentions"
Back in May, we noted that minutes from the ECB’s April 14-15 policy meeting seem to reveal that the central bank is either obtuse or else suffering from a frightening bout of willful ignorance. Here’s are the excerpts which led us to that assessment:
Since the Governing Council’s previous monetary policy meeting on 4-5 March 2015, the implementation of the ECB’s expanded asset purchase programme (APP) had had a significant impact on euro area financial markets, contributing to further declines in government bond yields.
A strong signal needed to be sent to euro area governments urging them to press ahead with structural reforms and to take measures to improve the business environment. Only with such complementary action could the full benefits of the monetary policy measures be reaped.
Now obviously, implementing a €1.1 trillion program designed specifically to lower government borrowing costs is the exact opposite of sending a “strong signal” to policymakers regarding the absolute necessity of getting serious about fiscal rectitude. That is, if it does anything, PSPP discourages governments from reining in spending by artificially suppressing borrowing costs, which effectively robs the market of the ability to price government risk.
Well, as it turns out, even if the ECB doesn’t understand this, Mario Draghi’s former employer certainly does, because a new paper co-authored by Goldman’s Huw Pill and Alain Durre acknowledges the role central banks play in discouraging fiscal discipline. Here’s more from Bloomberg:
The unconventional monetary policies of central banks often face limits because they could end up hurting as well as helping economies.
That’s the warning of Goldman Sachs Group Inc. economists Huw Pill and Alain Durre in a paper prepared for the first annual MMF U.K. Monetary and Financial Policy Conference to be held in London on Friday.
Their concern is that if central banks deploy overly generous unorthodox policies, there will be less pressure on governments and companies to do their part to revive economic demand. That could leave monetary policy stuck on the hook.
“By relaxing constraints on other economic actors, central-bank support may create opportunities for them to shirk their responsibilities,” the economists said in the paper, which was co-written with Cristina Manea of Barcelona’s University Pompeu Fabra andAdrian Paul from the University of Oxford. “In turn, this may render it more difficult for the central bank to withdraw its exceptional measures.”
With interest rates near zero following the 2008 financial crisis, central banks such as the U.S. Federal Reserve and European Central Bank adopted unconventional policies such as lending to banks and buying bonds to rally the world economy from recession and then support its recovery.
While acknowledging the case for such policies is strong, the economists said their use is not without risk and unless constrained could end up spurring inflation beyond the central banks’ targets.
“These risks are particularly acute when the broader fiscal environment is unfavorable,” they said. “Such risks are exacerbated if the non-standard measures weaken incentives for fiscal rectitude or private sector restructuring.”
The danger is that temporary liquidity support becomes permanent and that central banks find themselves under pressure to lead rescue efforts in future crises too. That would drain the independence and credibility of monetary-policy makers, undermining their inflation-fighting abilities, according to the paper.
In other words, by shouldering the entire burden of "rescuing" economies, central banks have alleviated lawmakers of any responsibility and the longer this dynamic persists, the more difficult it will be to reverse. Furthermore, in the event the public suddenly wakes up to what's going on, inflation expectations (which have so far remained muted thanks to a combination of plunging M2 velocity, QE's contribution to the global deflationary supply glut, and a populace that's generally ignorant to what's going on at the world's central banks) will suddenly become completely unanchored.
Of course this may ultimately be exactly what everyone wants as tipped first by Macquarie and then more forcibly by Citi with the conversation now taking a rather surreal detour towards a realm where very "serious" people are now openly suggesting that central bankers should remove the last intermediary in the government financing ponzi scheme by bypassing banks and moving straight to "central bank financed final demand." Throw in the fact that unconventional monetary policy serves to inflate larger and larger bubbles the bursting of which will be promptly trotted out as an excuse to implement still more unconventional measures and you have the recipe for perpetual easing/insanity which will eventually lead to the death of the fiat regime. We close with the following warning from the above cited Goldman paper:
“The road to central bankers’ hell may be paved with good intentions."
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This was tried in the Soviet Union from 1917 til 1990 and East Block from 1945 till 1990. Misery will ensue.
That would mean WW4, since ww3 is already under way.
They also warned us they would take us over.....guess what?
Goldman needs a Yellen...
By the way, JANET:Jenta:YENTA
Annagramatic transforms are a common ploy....
Fffffffk CBs and their water-carriers world over...
Good intentions? There never was any (except for the klepto-class).
Another group of sociopath’s trying to position themselves on the right side of the collapse. That will not stop the rope from going around your neck MF.
How does that old adage go? ..
“Never ascribe to ignorance that which is obviously demonstrated to be blatant fraud, theft and malintent.” ?
Revisionist history is the best kind.
Goldman has been bailed out and now they want everyone to know that there are limits. Those guys are priceless.
A dubius statement by the fed.
The problem with our money (even what’s in your wallet) is it is not ours but the Feds (Federal Reserve Notes, the bankers) and they have free willy (thanks to our elected officials) to experiment with it, set its value, as they please, no matter you worked your life for it. Any money you have is courtesy of the Fed as they can NIRP it, inflate it away with keystrokes.
They ought to know, they paved the road.
I love how all the criminals are trying to distance themselves from the crime(s).
this tells me the end of the game is very close.
They are all lining up who they are going to blame, the politicians and the bankers jockey for position every day. Both are "for the people".
After the fingers are pointed the barrels will follow.
They are all lining up who they are going to blame, the politicians and the bankers jockey for position every day. Both are "for the people".
After the fingers are pointed the barrels will follow.
Ol' Yellen is being set up as the fall guy.
I am waiting for Lloyd Blankfein to submit a direct report from Hell when he arrives there shortly.
The Vampire Squid knows more about hell than the devil himself.
Aren't most Western Central Banksters Goldman puppets?
Even Goldman has a master.
That is correct. And I will lead Goldman to their demise in very short order, mark my words.
They have taken responsibility for the world. It is a heavy burden if one says "trust me to take care of you" so that they can take away people's power. There are three paths forward.
1. Making good on your promise and responsibility.
2. Betrayal
3. Relinquishing power
We live in an age where 2. is the prevalent meme. We have broken and twisted leaders.
Machiavelli and Ayn Rand did a great disservice to society. They made giving up on responsibility an art form. Machiavelli first by telling us that self-interest was the only thing of importance and Ayn Rand by saying that abdication of responsibility and isolation is the best option.
I can see this. I agree it appears our elected class have completely abdicated their responsibility to implement actions that would help the people.
I see or hear nothing coming out of DC. To some extant, good. They don't seem to help. But everybody now just looks at the FED, an unelected, private entity, with baited breath.
The only thing coming out of DC seems to be a fantasy foisted upon the people, that keeps the can rolling down the road.
You won't see anything coming out of DC until the population wakes the fuck up and quits bickering over insignificant differneces like abortion, EBT benifits, gay marriage, and faux debt ceilings, and come together on causes that matter most, like eliminating the CB, reinstituting Glass-Stegall, and pulling out of shitty tade deals like NAFTA, TPP, and T-TIP. Stop making it so fucking easy for capital resources to leave the country.
What, I wonder is their good intention?
They have exhibited no desire for a free, fair and open understanding of the environment, issues and possible paths forward. They delude themselves into believing that only they are capable of understanding, which is total bullshit. This can be said of any government that covets its own perpetual existence. Repugnant secrecy, rather than openness and truth guide their every move. They seemingly feel that not only can they manipulate the public for their own covetous aim, but that they have the power and right to do so. Any crack in the façade are filler with vicious attacks and more obfuscation. But as their control ages it develops more cracks.
One wonders, what is so awful about being good, honest and fair?!? They must believe that it is an unthinkable option, or only for the weak. Is their being do twisted? Or have they been assigned that role by the adversary and are doomed to be hated for this entire life, wallowing only in their self aggrandized and self congratulatory sewer. Do they really like themselves so much or is that too only a façade, made tolerable by fiat wealth?
They feed the machine, that is all.
A machine that devours souls?
A strong signal needed to be sent to euro area governments...
and that my friends is how shit really works.
...you don't tell us, we tell you. [nurse, They Were Expendable]
Same story different day.
“The road to central bankers’ hell may be paved with good intentions."
it also may be paved with evil intentions
What a bunch of f*ing hypocrites. Without central bank intervention, they wouldn't exist.
The whole goddam existence of the central banks and their twisted governments hinges on just one thing.......suppressed interest rates. Take away low interest rates and everything will fold within a day.
EBTs were down for just hours......I don't want to see what a day looks like.
What a ground breaking study Goldman did. Wow, who could have guessed money junkies would get addicted to free money and socialized losses. Shocker.
Good Inenrions ?, for who ?
But your still going to boorow money for nix to buy more stuff now so you can sell it for more tomorrow. Problem is, the more you dilute something, anything it becomes less valuable not more valuable. And so tomorrow will never come, so your forced to go back again and borrow more money for nix to buy even more stuff.
This mentality leads to Quantative Easing to Infinity Squared. And the Banks have created their own problem.
I have been saying forever that legislative stalemate/paralysis/dysfunction has removed FISCAL POLICY from the equation and left ony MONETARY POLICY in charge to (guide) the economy.
And this situation was severely exacerbated by Citizens United. TPTB purposely have ensured congressional gridlock by sprinkling their chosen around to result in the legislative seats distribution of their choice. Whether Repub or Dem makes no difference since they want stalemate and have done a superb job of going about making sure it exists.
interesting point and spot on I believe.
The Road To Hell Is Paved With Central Banking Dildo's
This is a joke right. Goldman's basically saying we're all good now, short the market waiting for the next crash where they'll scoop up everything for nothing and inflate once again. In the end they'll own everything.
Aren't most of the central banks run by exgoldamites. Incredible balls on these scumbags.
Next step is print and give a government cheque to everyone to spend.Justdo it during an election campaign.
PINCH ME - I must be dreaming.
Those words came out of Goldman????
The people at GS must realize ... that the rest of the World sees them as being every bit as "integral" to that System that is "going to H*ll"... they are part and parcel of the same apparatus!!
there is no stinkin' good intentions, never has been, there is only perpetual banker's greed paving the way to anywhere....these pricks and prickesses sit there so smug after stealing trillions like shit wouldn't melt in their mouths!
“The road to central bankers’ hell may be paved with good intentions."
I'm sorry to say that such a statement sounds less sincere when only uttered standing in front of hell's entrance door...