Losing My Religion - "Central Banking Increasingly Looks Like An Act Of Faith"

Tyler Durden's picture

Authored by Jeffrey Snider via Alhambra Investment Partners,

Well, that clears that up. In case you missed it, back on June 27 Mario Draghi triggered the latest declared BOND ROUT!!! with what was characterized as a very upbeat economic assessment for Europe. And if things are moving forward there, they just have to be everywhere else.

It came off as “hawkish” in the sense that if real acceleration is at hand, ECB normalization of first QE then interest rates can’t be that far behind. The closer we are to the first part, closer is the second. Bonds sold off, and the collective mainstream imagination ran wild.

In truth, Draghi wasn’t “hawkish” at all, nor was he all that upbeat. The media, primarily, saw what it wanted and connected dots that it had created. As for the economy, he merely stated that it was progressing. Why that was particularly important was never stated, especially since Mario Draghi always says the economy is progressing. Out of his mouth, it never is otherwise.

More important than all that, however, the ECB chief was left to try to describe the current state of our central money problem, without recognizing it yet as just that. The economy may or may not be meaningfully improved, but inflation, the economy’s chief monetary indicator along with bond rates, will not behave. For Draghi’s speech, it was characterized as a contradiction.

Following the latest policy meeting, the mainstream believes Draghi is now “dovish.” Gone is the certainty with which the world seemed to be moving toward a better place, replaced with caution and apprehension. Many ascribe this apparent 180 degree shift as a policymaker not wanting to upset markets. If bonds sold off in a rout after his last speech, he must have noticed and reacted with a more soothing posture this time.

None of that is actually going on, of course. Draghi was no more “hawkish” in late June as he isn’t now “dovish” in mid-July. At both times he was consistently confused. Today, he came as close as might be ever expected to stating that as a fact outright:

There really isn’t any convincing sign of a pickup in inflation.

As some reports noted, he stated that same thing several times with slightly different wording. The problem continues to be an absence of all the things required to make money become inflation – starting with wage growth. Without that, can the economy really be improving?

The answer is no, and even an economist like Mario Draghi knows it. In that respect, the European economy is as stuck as the US economy. When friendly outlets like the New York Times notice this lacking vital component, it cannot be as something of a trivial difference:

Central banking increasingly looks like an act of faith.

Mario Draghi, the president of the European Central Bank, and his Bank of Japan counterpart, Haruhiko Kuroda, have spent trillions of euros and yen without generating as much inflation as they want. Yet they have little choice but to insist their policies will eventually work.

The eurozone is finally experiencing a robust recovery and the only things lacking are a pickup in wages and inflation, Mr. Draghi said on Thursday.

Is it really a “robust recovery” without a pickup in wages and household income? Mr. Kuroda can answer that question best with Japan’s experience stuck for a quarter century in, of all things, Japanification. The essence of that permanent stagnation is the lack of income and wage growth, the lagging behind of households that policymakers can’t for some reason see as the most important economic element.

Work equals recovery, and with more work comes more wages. Anything else is just the shifting of numbers, the economy flying erratically like a rocket without its tail fins.

Europe’s economy is booming, except it’s not. Mario Draghi is hawkish, except he’s not. If there is one thing policymakers, media, and regular folks in all these places are starting to really understand, it’s that something important continues to be missing. They may not yet know what it is, so the focus on inflation (and the bond market) is good in that “we” are finally starting to ask the right questions.

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GUS100CORRINA's picture

Between FUKUSHIMA and the BOJ balance sheet, I'm not sure which one is more dangerous.

By the way, FUKUSHIMA disaster did not involve just 4 reactors which are now melting their way to the center of the earth, but there were 15 reactors involved. They were able to contain the other 11 reactors. When I read that little factoid, I went WOW!!!

Nuclear Power is a real bad idea. Like the BOJ balance sheet, the hits at FUKUSHIMA just keep on coming.

Debt-Is-Not-Money's picture

"Using nuclear energy to boil water to create steam is insane"


philipat's picture

And yet despite Debt/GDP approaching 300% JPY continues to strengthen. It has plenty of potential to get MUCH weaker when the SHTF and that is something PM investors should keep in mind given that Gold only increases when JPY/USD declines (ie a stronger JPY vs USD)?

Number 9's picture

The essence of that permanent stagnation is the lack of income and wage growth, the lagging behind of households that policymakers can’t for some reason see as the most important economic element.

yep, might just as well say fvkit and stay in the parent's basement playing WOW where you have real friends.

Anteater's picture

Today's Sunday paper Classifieds:

3D Industrial Designer - Sketchup and AutoCad - $10 - $12 an hour

Home-School Curriculum, Video Lesson Teacher - $10 - $12 an hour

Blow-and-Go Lawn Landscaping Crew Member - $10 - $12 an hour

Rents for an 'efficiency' apartment, 349SF, no BR, are $1350/month,

if you can find one. Low-price real estate, brokers want all-cash deals.

"You're gonna need to grease that butt plug from all the winning!" Don the Con

JLM's picture

Whats missing are honest facts. The way to navigate this is to understand the official bullshit narrative and develop your own understanding of what really is going on and act accordingly.  Never act on the official narrative.

VWAndy's picture

  The very notion that anyone could be trusted with that kind of power on a planet filled with humans.

Dwarsligger's picture

Do you want to know what bankers are up to nowadays? Then look into their own strategic planning. They have a whole new market mapped out: looting the poor in the developing nations. How? Be the first in the know:

"I think we have a new playing field"

Rick Cerone's picture

A Central Banks job is to destroy decentralized Capitalism.

iamerican4's picture

Econ 101: Primary Factor of Production is Psychology/Spiritual Consciousness.

America took off like a shot because God was/is our recognized Sovereign: Annuit Coeptis/Godly Capitalism until Rome and Fascism usurped us accompanied by their false-Jew Khazar partners' satanic cult psychosis - the pedo homo Anti-Christ we came here to escape.

The Lord works in mysterious ways.

Thankfully Satan's Fifth Column ruling false-elite Beast of (((Gog))) and Babylon - our founder and prophet identified as the "Pseudo Aristoi" - now upon us is in the process of being cast down. 

Anteater's picture

Here's a link for the New Israel under Trump-Kushner:


GRDguy's picture

The main problem with "an act of faith" is that one is setting themselves up to be lied-to and stolen-from.

Don't matter if it's finance or religion.  Ministers work in both fields.

Pollygotacracker's picture

When economies require central bank manipulation game over. Duh.

Stormtrooper's picture

What's missing is honest money that can't be printed in a vertical fashion.

GodSpeed_00's picture

This central bank system will collapse soon. The internet age has not been kind to the bankers. Probably 90% of the people aware of the scam now would have had no idea before the internet was available to spread understanding of the system. Their replacment, cryptocurrency, is already here.

ah-ooog-ah's picture

"It is difficult to make a man understand something when his paycheck depends on him not understanding it" -

Most folk I know are one or more of:
- in denial - know the game is up but keep on regardless
- ignorant - incapable of polysyllabic conversation
- anaesthetized to the world by facebook et. al.

logicalman's picture

I find the same.

If I were to put numbers on it, these would be based on my personal experience.

5% - in denial - know the game is up but keep on regardless

I'd bracket these two together at about 93%

- ignorant - incapable of polysyllabic conversation
- anaesthetized to the world by facebook et. al.

I do find one other category, the remaining couple of percent, who know something smells funny but haven't managed to figure out what it is.

I always try to point those guys to where the smell is coming from, given even half a chance.

logicalman's picture

Losing My Religion - "Central Banking Increasingly Looks Like An Act Of Faith"

Behind the curve or what?

If it ever looked like anything else you've not been watching closely enough.

Umh's picture

The FED is faith based? Maybe they should consult www.flyingthehedge.com.

Åristotle's picture

In what sense we say the Forms are causes and substances in themselves has been explained in our first remarks about them; while this presents difficulties in many ways, the most paradoxical thing of all is the statement that there are certain things besides those in the material universe, and that these are the same as sensible things except that they are eternal while the latter are perishable. For they say there is a man-in-himself and a horse-in itself, without further qualification, — a procedure like that of people who said there are gods, but in human form. For they were positing nothing but eternal men, nor are they making the Forms anything other than eternal sensible things. —997b4

In the same way, monetary mythology asserts that there is a money-in-itself which when replicated must behave like its Form. But this is not true and yet another example of Plato's mistake which the masses are compelled to believe while their philosopher-kings appear befuddled, confounded, but above all, in no way could they be wrong. After all, who knows better than those who have direct contact and are thus in control of the Form? And if the replication of this monetary Form is not 'working' for the masses, then certainly, they say, it must be because there is not enough of it.

wattie's picture


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JailBanksters's picture

Religion is a Faith, and a Faith is a Belief, a belief that something is real, that something exists beyond the Great Barrier (Star Trek: The Final Frontier)

Therefore, Central Banking is a Religion, it's a belief that what it does is real and has value.

It only exists as long as those outside the Banking Cartel believes it has value, but to those inside the Banking Cartel it's absolutly worthless because they can create as much as they want to go buy stuff, as long as you accept it in exchange for physical assets.

That's all Banks want, physical assets, not peices of paper with numberz printed on them.

Writting this just makes me think jost how big a CON JOB Central Banking is, that's my belief.

It's the perfect crime.

SilvaDolla's picture

"I'll be damned!...a marsh melon!"

wisebastard's picture

Central Banking Increasingly Looks Like A Fucking Scam.......isn't the very act of loaning money into creation an indication that the bankers are fraudsters......