Central Bankers Are Not Omnipotent

Tyler Durden's picture

A generation of market participants has grown up knowing only the era of central bankers and the 'Great Moderation' of (most of) the last two decades elevated the status of central bankers significantly and while central bankers are generally very well aware of the limits of their own power, financial markets seem inclined to overstress the direct scope of monetary policy in the real world. Monetary policy impacts the real economy because it is transmitted to the real economy through the money transmission mechanism. This has become particularly important in the current environment, where, as UBS' Paul Donovan notes, some aspects of that transmission mechanism have become damaged in some economies. Simplifying the monetary transmission mechanism into four very broad categories: the cost of capital; the willingness to lend; the willingness to save; and the foreign exchange rate; UBS finds strains in each that negate some or all of a central bank's stimulus efforts. In the current climate, it may well be that the state of the monetary transmission mechanism is even more important than monetary policy decisions themselves. Some monetary policy makers may be at the limits of their influence.

 

UBS Investment Research, Global Economic Comment:  Memento Mori (Remember You Are Mortal)

Victorious Roman generals accorded the honour of a triumph through the city were treated as demigods for the celebration. To remind them of the limits of their powers, a slave was required to ride alongside the general, whispering from time to time some ego deflating phrase. Apocryphally this was “memento mori” – “remember you are mortal”. A similar process could well be applied today to the world’s central bankers. To be fair, central bankers are generally aware of the limits of their own powers. The problem is that financial markets have embraced the cult of the central bank, and it is central bank watchers who need to be told “remember they are mortal.”

The great moderation of the last two decades elevated the position of central banks. By the 1990s central banks in the OECD had generally reduced inflation, and in doing so reduced the inflation uncertainty risk premium. This had lowered not only the nominal but also the real cost of capital (quite justifiably). This in turn facilitated investment, capital gains in asset classes, and fortuitously accompanied an extended period of economic stability for most economies.

This period raised the status of central banks. Fiscal policy ceased to concern markets too much, with the possible exception of Japan (where monetary policy was demonstrably failing). Changes of government were not generally a macroeconomic concern, although specific sectors could still be impacted by specific policies. Stimulus was to come through monetary policy, and moderation would be enforced by the same means. Perhaps inevitably, at a time when a lower real cost of capital was driving economic prosperity, the arbiters of the cost of capital were seen as the drivers of economies.

A generation of investors and financial market participants has thus grown up knowing only the era of central bankers. The modern communication age further encouraged this. With twenty four hour business news, having a whole host of central bank speeches to cover must be something of a godsend. Federal Reserve Presidents (voting or not), ECB board members and participants in the Bank of England monetary policy committee all provide a wonderful way of generating newswire headlines and filling airtime.

Time to ask “why?”

With the dominance of monetary policy seemingly established in the OECD, why should investors commit the economic blasphemy of viewing central bankers as merely mortal? Central bankers need to be considered mortal because monetary policy has its limits. Those limits are now being reached, or at the very least approached, in some economies. We need to remind ourselves that the potency of monetary policy in the real world depends on the effectiveness of the monetary transmission mechanism as well as the level of policy accommodation.

Investors need to remember to ask “why?” when questioning the need for monetary policy. With an almost Pavlovian response function investors tend to see an economic problem and expect a monetary policy reaction. If markets fall, investors need only to run to central bankers and Ben Bernanke and his ilk will put on a sticking plaster and offer a liquidity lollipop to the investment community for being such brave little soldiers in the face of adversity. However, as Japan showed, there are limits to the effectiveness of monetary policy.

The concept of monetary policy “pushing on a piece of string” has become an almost hackneyed idea, but it is something that has to be remembered nonetheless. For monetary policy to have a direct impact on the real economy, the accommodation needs to be transmitted to the real economy through some medium. That can be via borrowing costs, incentives to lend, disincentives to save or the exchange rate. But in each instance monetary policy requires some catalyst to produce a real economic reaction. It is reasonable to ask whether those catalysts are present today. In short, the question in analysing the impact of monetary policy across the OECD is not primarily where central banks put interest rates or liquidity; it is increasingly how the monetary transmission mechanism is situated.

1. Borrowing costs

The transmission from monetary policy to real world borrowing costs is automatic in a select number of instances. A UK base rate tracker mortgage, for instance, is directly connected to the monetary policy interest rate of the United Kingdom. In such instances borrowing costs fall mechanically if monetary policy is eased. Those who have already borrowed money will receive an improvement in cash flow. This is effectively a transfer of disposable income from savers to existing borrowers. Generally speaking savers spend less and borrowers spend more (why else would they be borrowers?), so lowering interest rates costs in a direct sense can stimulate economic growth through this income transfer.

For new borrowers the transmission via borrowing costs is not so clear. There is no necessity for a rate cut to be passed on to a marginal borrower. Before considering the role of banks in this regard it is worth acknowledging the importance of the non banking sector. Large companies, generally speaking, are able to borrow from financial markets. If a monetary policy easing lowers corporate bond yields, then large companies may benefit from that market response. The benefit can be transmitted to smaller companies. Inter-company credit is the single most important form of credit for small businesses. If large companies experience lower borrowing costs, they may transmit some or all of this reduction in a more accommodative provision of inter-company credit to smaller businesses.

This process is contingent on investors being willing to drive corporate yields lower, and on large companies having a sufficiently low liquidity preference as to be willing to transmit that borrowing cost benefit to their smaller business customers. One of the peculiar problems of this downturn compared to previous downturns is that this willingness to transmit credit to smaller businesses has been lacking – and central bank policy easing has done little to change the provision of intercompany credit.

The classic theoretical transmission of monetary policy is via banks lowering borrowing costs for new borrowers. That transmission assumes a static risk environment for banks. If banks are risk adverse they may increase the premium they charge on lending to the real economy, negating the impact of the policy rate cut. Indeed, in extremis the marginal interest rate for new lending could be infinite. If banks do not wish to lend, then new credit cannot be obtained at any price, at least as far as a prospective borrower is concerned. The change in the policy interest rate is then entirely ineffectual.

2. Incentives to lend

This brings us to the incentive a bank has to lend in the wake of monetary policy accommodation. There is an obvious arbitrage to be exploited if the cost of funding to a bank (the policy interest rate) is lower than the rate that is charged to the customer of the bank. However, this remains contingent on the willingness to lend. If banks are under pressure to reduce the size of their balance sheets (as Euro area banks are today), then the disincentive to lend may outweigh the inducement offered by arbitrage arising from the lowering of a policy interest rate.

There is also a somewhat more subtle potential stimulus from lowering policy interest rates. A combination of lower policy interest rates with unchanged (or largely unchanged) bank interest rates means an increased profit margin for banks. The immediate transmission of central bank accommodation in such circumstances is nil as there is no increase in lending into the wider economy. However, the profits that the banking sector make by exploiting a widening interest rate differential (commercial bank rate less policy rate) could lead to a more rapid repair of balance sheets, and therefore hasten the normalisation of the banking system.

Helping banks achieve better profits does seem to be a compelling argument for accommodation, but there is a risk. Just such arguments were presented when Japanese banks tried to repair their balance sheets in the 1990s. Supported asset prices (e,g, Japanese government bonds propped up by the Bank of Japan’s rinban operations) and very low costs of liquidity were supposed to generate profits from the yield curve, repairing balance sheets, leading to a stronger transmission mechanism through more bank lending. It never happened of course.

The market’s scepticism about banks outweighed the benefit of earnings, and the fall in asset prices outside of the government’s operations (real estate, most obviously) ended up doing damage to balance sheets faster than bank profitability could repair them. This is not to say that the monetary policy method can never work through this transmission mechanism. It is merely to point out that in a liquidity trap the monetary policy method of improving bank balance sheets needs to be treated with a healthy dose of scepticism.

3. Disincentive to save

Lowering the return on liquid savings through monetary policy accommodation is supposed to be a disincentive to save. If the objective of saving is to earn a rate of return on one’s money, then this is of course entirely logical. Lowering the rate of return on liquid savings gives an incentive either to spend, or to move into higher risk assets (causing those asset prices to increase, and creating a positive wealth effect).

However, if there is extreme liquidity preference in a financial system the impact of changing interest rates is minimised. Investors basically ascribe a value to liquidity which overwhelms the absence of any return earned on it. The extreme of this is of course the negative T-bill rates evidenced in US during the more stressed episodes of the recent global financial crisis, or indeed in Switzerland recently. Liquidity (and associated safe haven status) is so prized that investors area actually prepared to pay for the privilege.

4. Foreign exchange rates

Superficially, monetary policy and exchange rates are intimately intertwined. New Zealand makes a formal virtue of this through considering the combination of trade weighted exchange rates and interest rates in a monetary conditions index. How is monetary policy supposed to influence an exchange rate?

There are two critical transmission mechanisms from domestic interest rates to foreign exchange. The first is the relative rate of return, or the relative borrowing cost of a currency. If the interest rate in a domestic economy goes down then there is less incentive to invest in the fixed income assets of a country. There may also be the fabled and at times mythical “carry trade”. Investors will borrow in one currency (where it is cheap), sell that currency and purchase higher yielding assets in a second currency.

The second possible transmission mechanism is simply relative money supply. If monetary policy expands the domestic broad money supply, then there is in theory more money available for the foreign exchange markets. Increase the supply of something, and you should reduce its price.

Both of these transmission processes run into problems via liquidity preference. If liquidity preference is high then the international demand to hold cash balances in a currency is unlikely to be related to the return earned on those balances (it is the old adage of “return of capital not return on capital” that directs investor strategy – as Switzerland demonstrates). If there is liquidity preference in the economy then borrowing for carry purposes becomes more difficult. Finally, the supply of domestic liquidity to the foreign exchange market is not contingent on the expansion of the domestic money supply alone. If there is an increase in domestic money supply relative to domestic money demand (or liquidity preference) then there will be a weakening of the currency. If domestic money supply increases are simply absorbed by the sponge of liquidity preference then the supply of currency to financial markets will not change, and can have no impact on the currency value.

Watch the transmission

We are not arguing that monetary policy is redundant in the OECD. That clearly is not the case. What we are arguing is that the money transmission mechanism is now at least as important, and perhaps more important, than central bank policy decisions in assessing the impact of monetary policy on the real economy. The Bank of England is demonstrating this with its policy actions – the Mansion House speech showed a central bank paying as much attention to the monetary transmission mechanism as to direct forms of liquidity intervention. We believe that further quantitative policy from the Bank will be rendered economically useful through the medium of better transmission via the banking system (the liquidity preference of which is actively being reduced by policy changes). The efficacy of the transmission mechanism in the United States is evident from the bank lending numbers themselves, as well as surveys like the NACM (of borrowers) and the Fed’s Senior Loan Officers’ Opinion Survey (of lenders). Our US team’s forecasts reflect a belief in the effectiveness of monetary transmission such that the Fed may well moderate the degree of monetary stimulus next year.

Where monetary policy transmission is moot is the Euro area. The need to improve bank capital adequacy coupled with the risk aversion of an economy beset by structural problems has reduced the ability of monetary stimulus to transmit to the real economy. Central bank policy for the Euro area seems to be directed at minimising basic liquidity concerns (the failure of the interbank market to function effectively). Bank, corporate and saver liquidity preference seems likely to remain high. The ECB must hope that the banking system (or, if necessary, the corporate sector outside of a disintermediated banking system) can be made a more effective transmission mechanism than it is at the moment. Our concerns about the speed with which this can be accomplished are one of the reasons we think the Euro area will persist in a sub trend environment for so long a period.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Doña K's picture

The word "Central" itself is scary adding "Banker" to it is deadly.

Chaos theory seems to be associated with whatever they do. Hence, uncotrollable.

MachoMan's picture

I'm not sure it's chaos theory so much as hubris...  central planning has NEVER worked...  ever..  ever...  Whether some assfucker named ben or alan or nostradamus...  whoever the shit it is does not know how to fix the issue...  and, worst of all, they'll do the same shit their predecessors did in the same position and pretend something is different this time around...  "no, like we're calling it something different this time around so, like, it's cool n' stuff...  it'll be aight"

The other thing is...  OTHER SCHOOLS/PEOPLE HAVE PREDICTED WHAT WILL HAPPEN AND HOW IT WILL HAPPEN...  this isn't chaos...  this is political subterfuge...  this is machiavelian aptitude being substituted for science and manifesting itself as misallocation of resources...  it's not chaos...  it's inevitable...  it's power.

gojam's picture

Peak people is an interesting concept but I fear we're a long way from it.

Funny article here about the dicovery of the 'God' gene - http://theneedleblog.wordpress.com/2012/07/04/scientist-announce-discovery-of-the-god-gene/

Element's picture

Well, how's Japan doing?

--

Japan fighting deflation with an aggressive QE policy

Sunday, July 8, 2012

http://soberlook.com/2012/07/japan-fighting-deflation-with.html

--

hmmm ... barely holding it together

The Alarmist's picture

The only reason central planning has not worked is that it has only been done in a higgildy-piggildy patchwork around the globe. If we only have the sense to finally do it on a truly global basis, then it would truly shine and we would all be so much better off under the reign of one truly sperior group of lords and masters. This is why the UN, IMF, G20, etc. need our support now more than ever.

oh yeah ... /sarc

NotApplicable's picture

Central banks are too omnipotent! There's nothing that they cannot destroy. As for a market perspective, well, central banks are not part of any natural market.

AnAnonymous's picture

The only reason central planning has not worked

_____________________

Central planning has not worked? Central planning has built 'America'

Pyramids are an exhibition of central planning. But hey, at least, pyramid builders knew that they did not build pyramids for themselves...

palmereldritch's picture

You do know that the Pyramids are not in America?

AnAnonymous's picture

There are pyramids in America. Probably not in 'America'

Another example of the confusion wished for by US citizens when they chose to use the name of a continent to refer to a country.

'America' has been built by central planning.

palmereldritch's picture

'America' was built by individulaism and is being subjugated by central planning since 1913 and incrementally ever since.

 This is a central planning that has its roots in the Bankster's City of London and the BIS and who created communism and the Opium Wars before that that subjugated the people of China.

I think you constantly criticize the wrong party as a perpetrator when in fact you should attack the real criminals...unless of course this is all a distraction.

AnAnonymous's picture

'Americans' have been such individualists they have been thriving like good on racism and they were so free of central planning before 1913 they used the power of a state apparatus funded through general taxation to crush neighbouring stateless societies.

And yes, the big tale of the city of London...

I have to remember this one along with the elite, the illuminati, the vatican etc

'Americanism' is at work. Nothing else. And 'Americanism' is such of an exhibition of individualism and absence of central planning, heart attack.

palmereldritch's picture

You sound like a 'State's Rights' advocate.  You should take that with an advocacy of the Second Amendment to China on behalf of you Bankster patrons.

"Change must come from a barrel of a gun" -Mao Zedong

(P.S.You just negated whatever feeble credibility you had by being a constant visitor to this website and not admitting the abundance of evidence of the financial malignant effect The City has had on the world through history. Nice to know who you work for now old chap. After all, who hates America and their contagious potential for economic and personal freedom more than globalist agents?)

AnAnonymous's picture

'Americanism' includes globalization. When US citizens hijacked humanity on 1776,July,4th, they turned it in a global project.

'Americans' are the globalist agents.

Advocating what?

Anyone who advocates for 'Americanism' advocates for central planning.

Once again, the ball is on your side. Keep it. It is an 'American' ball.

palmereldritch's picture

For the record you went out of character when you brought up the Vatican and the Illuminati.

Spirit Of Truth's picture

AnAnonymous levels the allegation of "central planning" at the one nation in need of more centralization if anything.  Meanwhile, the true "central planning" nations are successfully vying for the destruction of America and subjugation of Europe:

http://thespiritoftruth.blogspot.com/2009/05/russias-secret-war-plans.html

Ignoramus AA is...

palmereldritch's picture

And if it was a 100 years ago Putin would be portrayed as the Czar...and look what happened to him at the hands of the usual suspects.

Sorry, that Russia baddie line doesn't work because even the shadow of Communism (via Marx, Lenin and Trotsky who were all minions of the global Bankster cabal stationed in London and who were purposed with establishing order from their chaos as they systematically robbed the Middle Class and snuffed out free enterprise in true gangster fashion) is a remnant of a globalist construct.

Communist Russia bad. Now, just Russia, bad. Not flying.  Putin is a fly in the ointment to the usual suspects IMO.

As for AA, his didvide and conquer tactics enflame free thinking liberty lovers and entrap them into hating the Chinese he so poorly impersonates.  Again, more hate mongering and chaos and hence control.  Hate is a control mechanism after all.

Perhaps AA would be better suited with the handle Bankster Bob, his posts, it appears, are becoming that comically transparent...

http://www.youtube.com/watch?v=s27Oq5ot0ZI

 

BigJim's picture

You think he should just stick with the US Citizenism Citizens, whose nature is eternal 'meme'?

palmereldritch's picture

LOL

So true...these hacks should know by now that they have to stay with the script.

If he keeps it up they'll delete him and his Persona will have to re-spawn. More's the pity ;)

TPTB_r_TBTF's picture

You do know that the Mayan Pyramids are indeed in America?

Other Native American earthworks imply a [certain level of] central-planning system as well.  We didnT learn much about these in school because TChristianPTB want us to believe that these natives were uncivilized, heathen low-lifes. 

The Native Americans had Great Societies (with a certain level of central planning) which were destroyed by the European Citizens: their dieseases, rats, cockroaches, vices and greed.

 

TPTB_r_TBTF's picture

you are confusing Aztec with Mayan.

palmereldritch's picture

Wrong again Hans.

Would you like to go for Double Jeopardy where the scores can really change?

http://en.wikipedia.org/wiki/Sacrifice_in_Maya_culture

The city of Chichen Itza, the main focus of Maya regional power from the Late Classical period, appears to have also been a major focus of human sacrifice. There are two natural sink holes, or cenotes, at the site of the city, which would have provided a plentiful supply of potable water. The largest of these, Cenote Sagrado (also known as the Well of Sacrifice), was where many victims were cast as an offering to the rain god Chaac. A 2007 study of remains taken from this cenote found that they had wounds consistent with human sacrifice.[14]

Mayanists believe that, like the Aztecs, the Maya performed child sacrifice in specific circumstances, most commonly as foundation dedications for temples and other structures. Maya art from the Classic period also depicts the extraction of children's hearts during the ascension to the throne of the new kings, or at the beginnings of the Maya calendar.[16] In one of these cases, Stele 11 in Piedras Negras, Guatemala, a sacrificed boy can be seen. Other scenes of sacrificed boys are visible on painted jars.

BigJim's picture

I'm sure they meant well.

TPTB_r_TBTF's picture

.

"peak people" is the Plan (their Plan).

A synonym for The Culling.

A synonym for Depopulation.

.

iow, 7 billion sheeple are too many!  a few 100 million or 1 billion are "enough".  Cull the herd!

Join:

http://www.facebook.com/pages/I-Support-Human-Culling-Depopulation/16720...

 

CloseToTheEdge's picture

“It is no coincidence that the century of total war coincided with the century of central banking.” R.Paul, End the Fed

ITrustMyGut's picture

Is anyone on here familiar with the CAFR stuff? ( Comprehensive Annual FInancail Report )  Alledged untold billions of monies off books?

is it another bs underground saviour.. or is it real?

putaipan's picture

i have been calling for tylers/zh's thru multiple threads to please adress this also. there is a real need to adress this outside of a forum where people already 'believe'. please - comment or create thread, please?

putaipan's picture

btw- (just thought of this....) before george washington's blog picked up on this, all mention of CAFR was intertwined with the notions of person and national coporate identity- i.e the corporation of the united states, the corporation of you or me spelled in all caps. this then leads to the us bankruptcy of '33, our personal liability of that coorporate debt agreed to by accepting a social security #. ergo- accepting the savior existence of the carf funds means we'll have to accept the terms of our debt servitude..... ergot indeed.

ITrustMyGut's picture

thanks for acknowledging and adding too.. yes...  we need more info ....  beyond already believers...

Republicae's picture

I have to wonder if those who support the culling of the population will support it when they are the ones chosen to be culled...

Of course, they could make it a much easier process and simply shoot themselves now and start the process early!

putaipan's picture

really! the inverse culling is all that is requred.... eugenics for the .01% means resources and prosperity for the 99.9% millinal malthusianism!

Scalaris's picture

 

Shocking.

A linear correlation between world population and improvement of life via an evolution in medicine, application of technological innovation and proliferation of national trade systems.

Malthusians are becoming tiresome; they should get a fcking grip already and attempt to form a coherent solution instead of resorting to the same regurgitable rhetoric.

GMadScientist's picture

Don't worry, the <edible animal vector here> Virus will take care of that problem anyway.

 

putaipan's picture

a double post is called for here.

Bogdog's picture

Certainly a call for a New Eugenics. To be characterized by engineered market/currency/social collapse followed by mass starvation, war, pandemic pestilence. I can see the evil plan now. We are all pawns in someone elses game brought about by our pesky procilivity to procreate.

So, basically, all you people need to stop fucking.

There! I've connected all the dots for you.

 

ghenny's picture

No its fraud, waste and abuse.

grid-b-gone's picture

Power, hubris, habit, fighting the last war, sticking with the politically easiest policy (why EU austerity was abandonded), and other factors are all at work as central banks slowly lose control over their fiat currencies and economies.

Similar ebbs and flows are seen in corporations. Remember when GE and P&G grew 15-17%? Now they're working on at least a decade of stagnation. PG can be bought for less now than before the 2008 meltdown and it probably has lower to go.

Remember when Greenspan was god-like and the effect lingered for many years even after the bubble popped? Jack Welch and P&G brand managers experienced similar "can do no wrong" runs. 

As with Zeus, when a diety's power is eventually, commonly known to be lacking, we humans first look for a new diety. That's just how we roll.

We're always looking for the magic beans, and the cunning, the connected, the carpet-bagged, and the electable are always there to insinuate themselves into the next plausible solution.

The current solution would be to allow slow deflation to work off the excess, moderate worldwide wage gaps, and preserve the middle class - the goose that lays the golden eggs. Instead, we, in effect, ride Dr. Strangelove's rocket to a solution that only market and fiat currency limits will reveal to us. 

Add central bank control to your list of oxymorons.

All Risk No Reward's picture

Macho Man,

The system in place now is working WONDERFULLY!  They just didn't bother to tell the proles what it was engineered to do.

Henry Ford told us...

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.” Henry Ford

Charles A. Lindbergh told us:

“The new law will create inflation whenever the trusts want inflation. It may not do so immediately, but the trusts want a period of inflation, because all the stocks they hold have gone down... Now, if the trusts can get another period of inflation, they figure they can unload the stocks on the people at high prices during the excitement and then bring on a panic and but them back at low prices.…The people may not know it immediately, but the day of reckoning is only a few years removed.” (Congressman Charles A. Lindbergh, referring to the Federal Reserve act, Congressman Lindbergh stated this a few years prior to the stock market crash in 1929 which ushered in the Great Depression Congressional Record, Vol. 51, p. 1446. December 22, 1913.)

Andrew Jackson warned us:

Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out! From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson (February 1834), according to Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

James Garfield warned us:

“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

Robert H. Hamphill warned us (even included the mode of operandi, but the bankster propaganda was soo good, the average libertarian minded person has no clue how the banksters implement deflation to asset strip society):

“We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system…. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.” –Robert H. Hamphill

Woodrow Wilson eventually spilled the beans:

“A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” -Woodrow Wilson (after signing the 1913 Federal Reserve Act).

Horace Greeley spilled the beans:

“While boasting of our noble deeds were careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.” - Horace Greeley

The system is working SPECTACULARLY!

The mega banks have seized control of Europe:

Regime Change in Europe: Do Greece and Italy Amount to a Bankers' Coup?

http://www.time.com/time/world/article/0,8599,2099350,00.html#ixzz203MgL5Sz They seized control and didn't even fire a shot.  Even worse, the average ignorati consumer thiniks Greeks were bailed out instead of the mega banks looting everyone raw, so the average moron is gonna blame the Greek people when THEY ARE POWERLESS BECAUSE THE MEGA BANKS AND THEIR POLITICAL OPERATIVES RUN EVERYTHING TO FULFILL THEIR OWN BEST INTEREST!!! More power for the crooks.  Governments protect them from criminal prosecution so they can rob everyone.  The combine with government to run the drugs, launder the drugs, and throw your children in jail for using their product.  They own the private prison system and they partner with government to use their drug running (and gun running) in order to wage war on your liberties and freedoms (private property seized, assault 2nd amendment, etc...). They offload all their toxic trash on us and guys like Warren Buffett, WHO NOT ONLY HAS NEVER PAID ANY TAXES IN HIS LIFE ONCE BAILOUTS ARE FACTORED IN, HIS COMPANY OWES $1 BILLION IN BACK TAXES GOING BACK 10 YEARS, stands up and tells the average moron they need to raise their taxes so that more money is available to bail out his criminal fascists enterprises. And they get off on the stupidity of the average "consumer."  Andrew "I killed the bank" Jackson on the $20 bill?  Yeah, they think you are a moron. George "Ownership Society" Bush?  Yeah, he meant it, but not that we would own anything like a home, but that we would be owned by the crooks that pull his strings. George "they hate us for our freedoms" Bush - HE'S RIGHT!  But he's talking about the REAL TERRORISTS - THE INTERNATIONAL BANKING CARTEL. It's all a big joke to them... taunting their ignorant prey...  eliminating our civil liberties based on their al Qaeda threat narrative while they fund al Qaeda to wage international war crimes in Libya and Syria. THE SYSTEM IS WORKING PERFECTLY, PEOPLE! WAKE. UP!
insanelysane's picture

What is uncontrollable is how people and organizations react every time an action is made.  Some people call it unintended consequences which they are unintended when viewed by the people doing an action and expect a specific reaction but the reaction is not unintended.  The sheeple refuse to be led.  The government can make laws to regulate every activity that people do but people will set up "black markets" or their own banking system where necessary.  Central planning doesn't work because it tries to force outcomes that aren't "natural".

That being said, the central bankers are doing what they can to keep the whole sham going.  There may be ne%farious reasons for keeping the sham going but there is also the need to keep the markets up to some stable level.  The workforce participation is LOW.  One of the sheeples largest asset, real estate, has lost 30% in value or more.  If the markets tank to where they should be, the sheeple's other large asset, 401K plan, would also be down 30% or more.  It is a reality that not many will handle well so the game continues.

Atomizer's picture

Choas Theory 

http://www.youtube.com/watch?v=ZfuierUvx1A

 

There is nothing frightening about a word. Once they're centrally painted into a corner, the deadly elixir potion only remains a planners viable option.

Bill D. Cat's picture

What's the over/under on QE3 rumours this week ?

Kitler's picture
Central Bankers Are Not Omnipotent

But those who control them most certainly are. For now anyway...

Oracle of Kypseli's picture

Yes! But.....it is becoming exponentially more difficult to heard the sheeple.

Be it the internet(s), Zero hedge, a bunch of other forward thinking blogs or whatever else, it is happening.

I hope it will not take too long for common sense and conventional wisdom to be instilled in the general population. 

impermanence's picture

Figure another five thousand years or thereabouts and people will start to catch-on.

ExpendableOne's picture

Common sense and "general population" are mutually exclusive concepts.  I give you facebook as a prime example (people of walmart as secondary).

Republicae's picture

I would say that the political class and common sense are mutually exclusive concepts as well, politicans, once in power, tend to become a prime example of collective lunatics.

Snidley Whipsnae's picture

"But those who control them most certainly are. For now anyway..."

How did you get this idea? Other than effecting fiscal policy, to some degree, what powers do TPTB have that they cannot channel through central banks?

TPTB do have power over the pols that they get elected... until the pols face a decision of 1... losing an election because the voters are pissed... or 2 throw some power brokers under the bus to quiet the constituents.

...and, when push comes to shove, power brokers will be thrown under the bus by the pols that want to preserve their positions. At least, this has been the historical norm...