"We've Reached The Limit": Denmark Central Bank Chief Says Monetary Policy Is Exhausted

Tyler Durden's picture

For the likes of Paul Krugman, the Riksbank provides a cautionary tale for central banks wary of committing so-called “policy mistakes.”

Back in 2010, the bank started to hike rates. That decision halted a decline in unemployment and shortly thereafter, it became apparent that “the rock star of the recovery had turned itself into Japan." Or so Krugman says.

He went on to blame the “error” on "Sadomonetarism,” which he hilariously described as “an attitude, common among monetary officials and commentators, that involves a visceral dislike for low interest rates and easy money, even when unemployment is high and inflation is low.”

If these “sadomonetarists” are indeed “common among monetary officials,” then it’s news to us because everywhere you turn, DM central bankers have plunged headlong into the Keynesian abyss as NIRP proliferates and QE continues unabated in Europe, Japan, and yes, in Sweden, where the Riksbank made a U-turn in 2011 on the way to pushing rates deeply into negative territory.

Here’s where the world stands as it relates to NIRP.

The question one might fairly ask Krugman is why the world is still stuck with a stubborn deflationary impulse 8 years after Ben Bernanke mustered the “courage” to print. Central banks have eased, and eased, and eased and yet inflation is still below target (and that’s putting it nicely) while global growth and trade remain stuck in the doldrums.

It could be that the competitive nature of the rate cuts and QE expansion ultimately mean that no one gets to enjoy the benefits - or at least not for long. One round of easing simply offsets another in an endless race to some lunatic bottom or, ultimately, towards the abolition of cash. Or it could simply be that this isn’t the answer when it comes to juicing aggregate demand. But whatever the case, it’s pretty clear that what the global central banker cabal is doing simply isn’t working. What’s not clear - and this is the scary part - is what the consequences of these policies will ultimately be.

On Monday, we got a look at minutes from the latest Riksbank meeting and Deputy Governor Martin Floden is getting concerned. "The Riksbank has started to approach limit to how much it can cut rate without weakening impact or problems arising," he warned. "Monetary policy tools are becoming increasingly difficult to use," he continued, adding that "it’s likely that interest rate cut won’t have full impact on lending rates to households and companies."

In the same vein, Denmark’s central bank governor, Lars Rohde says monetary policy has reached its limit. "We have reached a point where monetary policy no longer has a big overall impact,’’ he said on Monday. "[It's] overstreched [and] there’s a limit to what more one can do’."

We agree. But we don't expect most central bankers do and indeed the Riksbank minutes suggest there may be more easing in the cards. "The executive Board was unanimous that it is important to have a high level of preparedness to make monetary policy even more expansionary," one absurd passage from the meeting account says. 

Stefan Ingves did acknowledge one thing we've been pounding the table on for quite some time, namely that to the extent any of these policies are actually effective at rescuing the economy, central banks should be wary of getting themselves into a situation wherein the world careens into recession and officials are out of counter-cyclical bullets. "If the economy begins to slow down when the policy rate is zero or even negative, this could entail a very difficult situation for monetary policy further ahead."

Why yes, yes it could. At least we know that the Riksbank is "unanimous in the need to be prepared," to do more of what isn't working and more of what is leaving the board increasingly boxed in. Einsteinian insanity at its finest, courtesy of global central banks.

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VinceFostersGhost's picture







KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) VinceFostersGhost Feb 22, 2016 8:22 AM

"Neither a borrower nor a lender be"


Rubicon's picture

Fuck Denmark, what about the Swedes?

Father Thyme's picture
Father Thyme (not verified) Rubicon Feb 22, 2016 8:37 AM

Take it to the limit one more time.

nuubee's picture

Wow, the Swiss are nearly -1%. I wonder what the interest rate margin is for the banks on large deposits.

Stuck on Zero's picture

It's not the central banks idiots ... it's the Socialist governments.

ZD1's picture


No doubt their socialist government thinks that inviting more Muslim refugees and third world people into their country fix all their problems.

The Saint's picture
The Saint (not verified) nuubee Feb 22, 2016 12:13 PM

If they are out of ideas they should study Japan.  It is the Energizer Bunny of on going stimulus to no end.

lakecity55's picture

They are all at the mosk.

Croesus's picture

They're all in bed with each other, so maybe the guy's right. 

The difference being, that other countries are in a better position to flex their muscles vis a vis policy, and will therefore last a little longer in the game. 

Either way, this fucker's coming down...it's not a case of IF, but WHEN. 

open-range's picture
open-range (not verified) VinceFostersGhost Feb 22, 2016 8:54 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.wallstreet34.com

_ConanTheLibertarian_'s picture

I'll take this a step further (or back), there's too much debt in the system. More debt has now an adverse effect on the economy,

Peak debt bitchez!

VinceFostersGhost's picture



If Denmark knows about it.....who doesn't?


Should I be worried here?

BandGap's picture

I could be wrong but the black swan that kicked off the depression of 1929-1940 started in Europe, too (Austria). The first domino is going to be a small one.

"There is something rotten in Denmark".

Never One Roach's picture

Did they make that little province, Denmark a country? Well, as long as they don't ban The Trumpster from their country I'll still recognize them.

silverliberty's picture

“Yet these were the words for which Americans were denounced by the rotted cultures of the looters’ continents. Now the looters’ credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide– as, I think, he will.

Eat the shit you've dropped on yourselves.  Ayn Rand said it was coming.  It's Here!

Peter Pan's picture

Monetary policy might be exhausted but the fools running it aren't. They will perservere with even more perverse forms of alchemy until they create a total panic in the market.

Arnold's picture

Honorable Krugman, it is time for Seppuku.

venturen's picture

Some rotten in the state of Denmark?...who knew

Dr. Engali's picture

Meh, they're fine. There's always the option to go NIRPier, and they haven't even started up with the helicopter drops yet.

Atomizer's picture


How does the real estate market look? We have watched this movie before. Love from United States. 

19 Feb/Residential property prices: selected series (nominal and real)

silverliberty's picture

Francisco D'Aconia:

“Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns–or dollars. Take your choice–there is no other–and your time is running out.”

StandardDeviant's picture

For once I want to correct Ayn Rand: She wrote this long after FDR had already started watering down the currency, so she ought to have replaced "dollars" with "gold".  I'm sure her (Scandinavian) pirate Ragnar Danneskjöld would agree.

Diplodicus Rex's picture

"while global growth ...... remain stuck in the doldrums"

Yeah, sure. If only growth hadn't stalled it would all be peachy in the garden. Here's an emeritus professor to explain the reason why that is not the case:

"The greatest shortcoming of the human race is its inability to understand the exponential function." Dr Albert Bartlett



"Growth" is only required because of the Debt-based, Fiat, Fractional Reserve Banking model where the currency is printed out of thin air at the inception of a "loan". However, only the principal is ever printed and circulates as currency. The interest is NEVER printed. In which case, when interest is paid back it is paid using someone else's principal. From the hour and minute of the first loan being made by this model there is never enough currency in circulation to pay both the principal and the interest. You can only collectively pay off the principal leaving the intetest outstanding. This is a highly deflationary model and for its short term survival it relies on an exponential increase in the number of new loans made to balance the principal plus interest which is being withdrawn from circulation.

Blaming policy errors for the demise of this system is nonsense. Sure, policy may accelerate or decelerate the process but it cannot reverse the process.



shovelhead's picture


We just need a Ponzi-er Ponzi scheme to keep rolling into the fields of Elysium.

Occident Mortal's picture

Economy checkmates the Central Banks.

NoWayJose's picture

But the big rally today is in hopes that China will do Moar to 'stimulate' stocks, that Draghi will likely do Moar (somehow), and that the Fed will not tighten any Moar!

Atomizer's picture

Here's another one from this morning. Let's engage in NIRP to turn this bitch around. /sarc

19 Feb/Residential property prices: selected series (nominal and real)

Element's picture



The question one might fairly ask Krugman is why the world is still stuck with a stubborn deflationary impulse 8 years after Ben Bernanke mustered the “courage” to print.

No kitchen sink was thrown.

silverliberty's picture

All disasters start small.  A conversation in Pompei: "Mt. Vesuvius just puffed some smoke.  Ah, it's nothing."

Calculus99's picture

If anyone needs flogging it's Krugman. 

Jayda1850's picture

They haven't reached a limit on monetary policy, full retard is still a ways a way. What they are really admitting is that they have reached a limit on the expansion of monetary policy because any additional expansion risks causing the sheeple to all wake up and realize how much they are getting fucked. They realize any more measures and they might have extreme social unrest. It's like them announcing to each other, "Hey guys, I know we have been fucking these people out of a shit ton of money, but maybe we shouldn't go balls deep lest they come for us with pitchforks."

Grandad Grumps's picture

The thing about fight club is that one never talks about fight club or even admits that it exists.

So, here is the issue: What if fight club gets into a situation where, for one reason or another, finds itself, most likely because of its own secrecy policies, unable to cope ... and their only known solutions are to repeat self-defeating actions of the past or to disband fight club?

IMO, it is possible that we are in such a situation today, running headlong into a wall to protect the secrecy and position of fight club. The world has been trained to not believe that fight club exists or ever could exist, I get that.

Maybe it is time for the two to go together as one. Symbolically the two towers have been torn down and replaced with the one. Maybe it is time for the parents to take the fight out of the sandbox, let the kids grow up and go bicker somewhere privately... if bickering is so important to them. Working together a resolution most likely can be reached ... and it might be the same resolution, but the kids won't be held hostage by it.

shovelhead's picture

This indicates a medication change could be warranted.

gcjohns1971's picture

"... let the kids grow up and go bicker somewhere privately..."

Experience leads me to believe that growing up consists of ageing sapping the energy to such a degree that "bickering somewhere privately" rather than beating the hell out of each other in public is a simple necessity brought on by physical limitations of age.

The 'wisdom of age' is most often the self congratulation resulting from the same.

Not complaining. I am there too.

Just trying hard to see things as they are rather than as I wish they were.

While I'd love to think I was wiser, I truly believe the difference in hot-headedness is that I simply don't have the energy for it and am forced to take a step back.

Maybe you are different.

Calculus99's picture

"There's a limit of what we can do". 

Then do nothing, let market forces work. The weak will be taken over by the strong, just like nature is supposed to work.

Look at the world, look how successful nature is, it's an unstoppable force. All it needs to work its magic is a bit of time.  


two hoots's picture

Put rates at a permanent 2% and send the Fed packing (along with the Federal Reserve Act).  Let the markets, economy and the people adjust to it.  We need a fixed monetary that all can understand and plan around. 

It is only more complicated than that because they made it more complicated.  Let the US treasury supervise the banks like the FDA supervises our Parmesan cheese...oh well, we need to do something.

Think I'll just pour some more coffee.

BigRedRider's picture

Coffee?  They're lying to you.  Have a Jim Beam...it's 5 o'clock PM somewhere.

lakecity55's picture

That is a great idea, but it will prevent the CBs from crashing the world, instituting Soviets, and creating the New Soviet JWO, comrade!

buzzsaw99's picture

they're lying. it's what central bankers do.

Arnold's picture

It is no sin to lie to infidels.

Or muppets evidently.

hendrik1730's picture

So, the big Guru at the Danish central bank says "they should be ready to do something" since the present situation is untenable. Right. What ????? Printing money, sinking interest rates, making interest rates negative, ALL THIS DID NOT WORK. What's left? Hyperinflation ? Probably. Every day more probably. To become a certainty in a few months time.

Atomizer's picture

The Pope can start dismantling his wall to fund the illegal aliens. Open door policy, just purchase a Vatican wall brick for €10,000. You can stay for 3 days. This is not an all inclusive resort. Payment is expected prior to arrival. 

Stay the fuck out of geopolitics, Pope. Do your job, teach Christian religion. 

silverliberty's picture

Atom, the pope doesn't know his job that is why he is does everything but.  

The Vatican has vast wealth hidden in the secret vaults below the Vatican.  I don't see them selling any of that wealth to help the poor.  Hypocritical boy loving pedaphiles.

silverliberty's picture

Is the use of gold and act of terrorism, yet?

Hongcha's picture

Maybe there is a way to tax all transactions ,,, drive money back into the banks.  I dunno, just thinking out loud here.

Hobbleknee's picture

Why do they always point to the lie that is inflation? 

Caught_Fish's picture

Get a calculator, enter the interest your bank pays to your account, subtract inflation rate (The real one). When weren't rates negative?