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The Era Of Independent Central Banks Is Over

Tyler Durden's picture




 

Federal debt has expanded by $9.5 trillion - from $5.7 trillion in 2000 to $15.2 trillion at the end of last year and, as Neal Soss of Credit Suisse notes, is still growing over $1 trillion a year (or $5 billion per day). The state of fiscal sustainability, as explained in this compendium of slides, is perilous, but as Soss notes - interest expense did not go up because interest rates fell faster than debt went up. Looking ahead, he notes that political choice theory suggests that taxes can go up, but not a lot (even as the change-maker-in-chief presents his case) and at the same time an unprecedented aging (demographic) shock limits the ability to control expenditures. None of this is news to readers but the financial implication is critical: interest rates must be kept as low as possible to avoid explosive debt dynamics. As Soss concludes therefore, and something we have been clear about for a long time, the era of independent central banks is closing as those institutions revert to their foundational role as fiscal agents of the state.

The Fallacy Of US Fiscal Sustainability In 11 Quick and Easy Charts...

The Evolution of the Federal Budget in the 2000s

US Debt That Matters

US Interest Expense Outlays

Which Interest Rate To Use?

Contribution to Growth in Federal Outlays in the 2000s

US Federal Revenues to GDP (%)

US Federal Outlays to GDP (%)

US Federal Deficit to GDP (%)

Federal Debt Interest Expense

US Youth Dependency Ratio

US Old Age Dependency Ratio

Not a pretty picture for shared sacrifice, budgets, and the expectation of more QE as inevitable.

Source: Credit Suisse

 

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Tue, 04/10/2012 - 17:35 | 2332897 SilverIsKing
SilverIsKing's picture

All this debt growth with no QE.  Makes one wonder.  Hmmmmmm....

Tue, 04/10/2012 - 17:38 | 2332898 Colombian Gringo
Colombian Gringo's picture

There is nothing to wonder about, nearly all government/bankster statistics are faked, fudged, fiddled or are outright fraud.

Tue, 04/10/2012 - 17:48 | 2332929 BoNeSxxx
BoNeSxxx's picture

Long gold and hard assets...

Oh, yeah, and the 4 B's.

However, if interest rates are held artificially low during an extended inflationary period, would it not make sense to purchase homes (lots of them) and rent them out?  Fixed costs over 30 years and rising rents monthly... seems like a no-brainer even Robo-Trader could understand.

Tue, 04/10/2012 - 18:00 | 2332958 MillionDollarBonus_
MillionDollarBonus_'s picture

"The Era of Independent Central Banks is Over"

I certainly hope not. The Federal Reserve bank of the United States of America was SPECIFICALLY set up to be INDEPENDENT. This means that they are allowed to pursue their dual mandate for maximum employment and price stability WITHOUT political meddling from upstarts like Ron Paul and other insolent members of congress. If Ron Paul becomes president and the economy takes a turn for the worst, then DON'T SAY I DIDN'T WARN YOU.

Tue, 04/10/2012 - 18:04 | 2332964 spinone
spinone's picture

you must work in advertising or as a political consultant in your real job.

Tue, 04/10/2012 - 18:07 | 2332972 TheFourthStooge-ing
TheFourthStooge-ing's picture

"Nobody could have seen this coming," said Any Economist, PhD, when asked about the economy's sudden increase in up-fuckery.

"Based on our system of models, the complexity of which compels acceptance, this is not one of the possible outcomes," added Ivory League, quasi-Nobel Sveriges Riksbank Participation Trophy in Economics laureate.

 

Tue, 04/10/2012 - 19:09 | 2333078 NewThor
NewThor's picture

TYLER DURDEN the Xth,

Could you please write a post based on the Timewave Zero chart overlayed against the Dow Jones chart from 2006 through the end of 2012?

If computers run the markets, maybe computers can see the future.

It's uncanny how the two charts are in lock step.

According to Timewave Zero, you wanted to SHORT all on April 5th, 2012.

Convert your shorts into cash on July 1st, 2012.

Then, that day take your cash and buy more food, medicine, toilet paper, more bullets, cigarettes, and such.

Please look at this chart....

http://2012rising.com/article/timewave-zero-peak-in-novelty-11-11-2010-i-ching-dna-fractal-reality

Tue, 04/10/2012 - 20:17 | 2333236 economics9698
economics9698's picture

"WITHOUT political meddling from upstarts like Ron Paul and other insolent members of congress."

LMAO. 

Wed, 04/11/2012 - 23:35 | 2336800 MeelionDollerBogus
MeelionDollerBogus's picture

"If computers run the markets, maybe computers can see the future.

It's uncanny how the two charts are in lock step."

There is no doubt that some can.

The key is to model fluid dynamics, to model pareto evolutionary models & to have enough data to work with.

Tue, 04/10/2012 - 20:15 | 2333231 Elmer Fudd
Elmer Fudd's picture

Maybe MDBB is a script writer for the puppets at MSNBC?

Wed, 04/11/2012 - 07:22 | 2333950 Amagnonx
Amagnonx's picture

The warning against centralization is well taken - which is why a rational approach is not a return to the gold standard, but rather a return to privately issued money - silver, gold, or vouchers that can be redeemed for goods.

 

For example large retailers, Walmarts etc and gasoline distributors would find a ready market for vouchers they issued.  Farmers could forward sell their goods for either gold or silver - or certificates representing those things.  Banks large and small could easily issue their own certificates and find acceptance - and values of those certificates and vouchers would fluctuate freely based on real or imagined data.  Currency crisis would no doubt arise from time to time, but would have smaller and localized impacts.

Wed, 04/11/2012 - 23:32 | 2336797 MeelionDollerBogus
MeelionDollerBogus's picture

Despite the MF global non-delivery of contracts stolen by JPM, farmers still have an option for the future: farm shares. Like a farmer's market but for delivery to customers, the money is paid up front & the yield is divvied up when ready. The only risk is if the farmer sets the price too low to repeat the process, or for the consumer to pay a higher price only to find out that their food was not in such short supply at that price-level - and you "get what you get". I think it's a great way to support farmers & get good food.

It ain't no futures-contract arbitrage market with margin, leverage & shorting but.... the only counter-party risk is that the farmer takes your money & you get nothing. Could happen but where's the farmer gonna hide? Can't hide a farm so people would come knocking if that did happen.

I trust Farmer Brown way more than MF Global or JP Morgan.

Peace 'n' chitlin grease, Farmer

Tue, 04/10/2012 - 18:35 | 2333029 asteroids
asteroids's picture

I actually enjoy MDB's sarcasm. Keep it up. But, when the revolution happens, people may coming looking for YOU. DON'T SAY I DIDN'T WARN YOU.

Tue, 04/10/2012 - 18:47 | 2333046 rotagen
rotagen's picture

"This means that they are allowed to pursue their dual mandate for maximum employment and price stability WITHOUT political meddling from upstarts like Ron Paul and other insolent members of congress"

..... There are comedians among us....Fed+stability?...no political meddling?...Paul an upstart?....Job creation?....Have you wandered into an alternate universe....Please ....report...universal...coordinates....calling...from....milky...way...galaxy....terra....forma....ursa....minor...???

Tue, 04/10/2012 - 18:58 | 2333062 sessinpo
sessinpo's picture

MillionDollarBonus_                          2332958

I certainly hope not. The Federal Reserve bank of the United States of America was SPECIFICALLY set up to be INDEPENDENT. This means that they are allowed to pursue their dual mandate for maximum employment and price stability WITHOUT political meddling from upstarts like Ron Paul and other insolent members of congress. If Ron Paul becomes president and the economy takes a turn for the worst, then DON'T SAY I DIDN'T WARN YOU.

 

Comment

Central banking isn't dead. Just this particular institution in this form is in trouble. As long as there is any single medium of exchange, even gold, there will be those that position themselves and get into positions to control that medium. That is something I don't think many have thought of. For example, let's say that we go back to a currency backed by PMs. Can one not see that certain peoples will manipulate PMs to their advantage? Centralization happens because people want a group to oversee the process and to hopefully make that process fair. But has history has shown, those overseeing the process are or become the foxs guarding the hen house.

As for you comment on the FRB being independent. There are always pros and cons to each situation. Yes, the FRB is supposedly independent but independent to whom? Clearly we can see that any institution of power is easily politisized and thus maybe not so independent. Also I am sure you are aware that the FRB is comprised of banks. The large financial institutions control the FRB. Do we see any conflict of interest especially after seeing many banks being bailed out - thus the term TBTF?

No one has come up with a solution to this. It is a macro problem yet to be tackled. BTW, Ron Paul should be giving props for his attention given to the FRB. Why shouldn't every institution that has such power not be able to face scrutiny unless there is something to hide. I am hopeful that his son Rand till take Ron's lead. Despite rediculous bashing I have received for not supporting Ron for president, I support the majority of his ideas. Ron just went about it the wrong way and his supporters did Rons' campaign a huge disservice.

Tue, 04/10/2012 - 19:27 | 2333130 nmewn
nmewn's picture

"This means that they are allowed to pursue their dual mandate for maximum employment and price stability WITHOUT political meddling from upstarts like Ron Paul and other insolent members of congress."

lol...

"Harry, I have a gift."

Tue, 04/10/2012 - 20:58 | 2333291 cranky-old-geezer
cranky-old-geezer's picture

 

 

The Federal Reserve bank of the United States of America was SPECIFICALLY set up to be INDEPENDENT. This means that they are allowed to pursue their dual mandate for maximum employment and price stability...

C'mon MDB, you're starting to sound a little too koolaidish even for sattire.

What's next?  "Obama needs more time to bring hope and change."?  Something blatantly stupid like that?

I believe whoever the next president is will preside over the collapse of the dollar then the collapse of America.  Obama, Paul, Romney, it doesn't matter, unsustainable debt doesn't care who is president.

When the rest of the world decides enough is enough and dumps the dollar, it and your beloved Fed will collapse ...followed soon after by America's collapse.

You and your ilk consistenly ignore what's happening to the currency, how your beloved Fed is looting wealth from every American by running the presses. 

Fed's mandate?  Price stability?  When prices have doubled in 4 yrs?  Doesn't look like your beloved Fed is very effective on that mandate.   And full employment?  With record numbers of Americans out of work and on food stamps?  Nope, your beloved Fed doesn't seem to be doing a good job on that mandate either.  Pretty miserable actually.

But you koolaid drinkers ignore facts like these, and go on living in your fantasy world of platitudes and promises, ignoring performance.

Tue, 04/10/2012 - 21:13 | 2333314 Ned Zeppelin
Ned Zeppelin's picture

If you did not already know or understand, MDB is a consummate satirist who is worthy only of our praise and adulation.  His posts are poetry.

Tue, 04/10/2012 - 22:15 | 2333412 Atomizer
Atomizer's picture

Without flagging the satirist ZH work, our Mao driven administration may seek MDB for IRS poetry back taxes. Tell him/her to close post with [/sarc].

Tue, 04/10/2012 - 22:38 | 2333449 MeelionDollerBogus
MeelionDollerBogus's picture

when has the Fed sought either of these mandates? Nothing the Fed can do can report accurately on employment (as honesty is dangerous) and nothing can spur employment (as monetary policy has never created jobs or innovation). Certainly price stability has been destroyed instead of sought, inflation has risen out of control instead of being held at a "stable 2-4%" and certainly the only real stable inflation would be with no currency issuance and -2 to +2 % from natural business cycles.

The fed got it all wrong. Then again, lying & stealing was its purpose from the beginning.

The very core of the Fed is political meddling as bribes are paid from printed money by the JP Morgan & other share-holders of the Fed. Being independent from law is a bad thing & the Fed is that "indpendent" party.

A Ron Paul presidency promises to return to law & order & destroy the mafia federal reserve. Thank goodness.

Tue, 04/10/2012 - 18:10 | 2332960 LowProfile
LowProfile's picture

 

if interest rates are held artificially low during an extended inflationary period, would it not make sense to purchase homes (lots of them) and rent them out?  Fixed costs over 30 years and rising rents monthly... seems like a no-brainer even Robo-Trader could understand.

Yeah, as long as everybody keeps working (so they can pay your hypothetical rising rent) and the housing supply stays stable (none of those foreclosures come on the market).

Renting, like owning, is a function of the prevailing wage.  If that isn't going up, neither is rent, or housing prices.

Gonna be a lot of surprised "capitalists" out there.

Tue, 04/10/2012 - 19:26 | 2333129 PersonalRespons...
PersonalResponsibility's picture

Don't forget about property taxes...

Tue, 04/10/2012 - 19:53 | 2333182 Will To Live
Will To Live's picture

When your "Tenants" lose thier job and see you as the enemy.  They might trash your property as you try to "evict" them, with the help of your "friend" the Lawyer.  It "could" happen.

Tue, 04/10/2012 - 20:39 | 2333271 yogibear
yogibear's picture

Knew of a property manager trying to collect that was shot on the face by the tenant. Both loose. One goes to prison the other goes to the morgue.  Rental income doesn't matter much if your dead. When people get desperate they go crazy.

Wed, 04/11/2012 - 23:26 | 2336786 MeelionDollerBogus
MeelionDollerBogus's picture

Yup. When people lose everything and have nothing left to lose, they lose it - obviously the often repeated / repeating Gerald Celente

Tue, 04/10/2012 - 18:01 | 2332961 SeverinSlade
SeverinSlade's picture

However, with rising rents, comes rising property taxes.  Thanks to those nice property taxes, you never own those homes.

Tue, 04/10/2012 - 18:08 | 2332971 BoNeSxxx
BoNeSxxx's picture

Thanks for reminding me... I was almost happy there for a minute...

Tue, 04/10/2012 - 18:41 | 2333035 Manthong
Manthong's picture

“role as fiscal agents of the state”

I understand the sentiment but maybe the situation is better described as the state is an asset of the banks  and functions to provide risk mitigation and debt relief.

Tue, 04/10/2012 - 19:04 | 2333072 SeverinSlade
SeverinSlade's picture

Yeah, sorry to blow that idea for you.

Buying homes at this point, even if you're able to pay in cash, is nothing but buying a depreciating asset (relative to something like gold) that accumulates an inflation adjusted tax liability.  Said simply, as the economy sinks further and further, you'll be wholly dependent on a renter to cover your tax liability...And in a inflationary/hyper-inflationary environment, wages are extremely likely to stagnate, meaning you're pretty much screwed.

Tue, 04/10/2012 - 20:15 | 2333232 riphowardkatz
riphowardkatz's picture

property tax argument doesn't really hold water. they can tax the heck of gold just as easily. 

raising property taxes affects rents or it affects how maintained the homes being rented are... rent controls are very possible. 

taxes are the last thing the government like this wants. raising taxes is rehtoric. they cannot pay off what they want with taxes it must be done with inflation. 

Tue, 04/10/2012 - 21:22 | 2333334 HurricaneSeason
HurricaneSeason's picture

Gold is only taxed when sold. It could travel multiple generations. It's not hard to find a house and property tax it every year. The federal government and state governments will cut the funding to cities and counties before they will cut their own budgets. Property taxes should go up significantly enough to significantly lower the value of the property they are taxing and they'll have to raise property taxes again.

Tue, 04/10/2012 - 22:14 | 2333410 WmMcK
WmMcK's picture

PM's are only taxed when sold on the white market.

I'd eat them first, on a boat, of course.

Wed, 04/11/2012 - 03:04 | 2333801 MrPalladium
MrPalladium's picture

"property tax argument doesn't really hold water. they can tax the heck of gold just as easily. "

No they can't!!

Wed, 04/11/2012 - 23:46 | 2336813 TruthInSunshine
TruthInSunshine's picture

The property tax argument holds quite a bit of water, actually.

Everyone has different circumstances, and there is a lifestyle element that's hard to quantify that relates to owning one's abode.

But whether one owns that abode 'free & clear' or via a mortgage note, one will always have to pay rent in the form of property taxes to the true owner (the local assessor).

Although I can make a compelling argument that the obligation to pay property taxes on one's primary residence (or any other land) is a massive scam, in some areas, the property taxes are relatively low as a % of the asset, while taxes are insanely high as a % in other areas. I know people paying $40,000 a year on homes that are assessed at 1.2 million (that can't be sold for anything close to that; think in terms of $800k if luck struck) that have lost 50% of their 'paper' value since 2006. These are enclaves along Lake Michigan in the area north of Chicago, Illinois.

The kicker is that the property tax will always have to be paid, even on a 'paid off in full' home, lest the home can be seized. How does that translate into 'free and full ownership of property' or anything remotely approaching 'private property rights' in the notional terms Americans have been brainwashed into believing exists in the U.S.?

And then there's that whole element of not knowing how much property taxes will be increase over time, as that matter is decided by an insulated and benevolent (/sarc) technocrat who works in the assessor's office, and whose sole discretion rules the day unless one takes the initiative to run through an intentionally red tape laden obstacle course in order to obtain even relatively small relief (and that may only come after filing a civil lawsuit at the end of the day).

The requirement to forever pay property taxes on one's primary residence, or farmland, is so offensive to the notion of private property rights that it's incredible to see how few people even think about it in a nation that bills itself as 'free,' democratic,' 'capitalistic,' or anything else that conjures up notions of liberty from government meddling.

Tue, 04/10/2012 - 21:18 | 2333327 Marginal Call
Marginal Call's picture

If you're able to pay in cash buying property right now is an excellent move.  But it has to be specific property, IOW arable land with local water supply-and hopefully not too many neighbors.

 

Need land to be independant.

Tue, 04/10/2012 - 18:26 | 2333007 Uber Vandal
Uber Vandal's picture

@BoNeSxxx

The other problems with rental properties are:

How much will your locality raise property taxes?

Will your tenants actually pay you, and leave the property in the same state as their first day renting?

How do you plan to raise rent when income for most people has been at best, flat?

Will your locality require you to meet all building codes?

If you tenant just up an leaves one day, how long before you can fill the vacancy?

Are you handy at fixing things, or do you have the cash to pay plumbers, electricians, carpenters, etc?

Does your locality permit you to evict your tenant, or do they get to live there for months at your expense while damaging your property because they can?

Sure you can take the tenants to court over some of the issues above, even win, but will they pay that judgement if they were not able to pay you in the first place?

My friend who was a land lord is much happier since he got out of it.

Tue, 04/10/2012 - 20:20 | 2333241 riphowardkatz
riphowardkatz's picture

yes making money is still work and often when people are done working they feel some joy.

yes income producing investments often require maintenance otherwise they are speculations. 

yes laws affect renting just like they affect apple or gm or gold for that matter.

yes there are taxes with renting or selling a property just like there is with gold or apple or gm.

your list is basically a list of costs associated with any investment opportunity.

It also doesnt list the benefits with the major one being a short of the dollar. 

Tue, 04/10/2012 - 19:52 | 2333176 youngman
youngman's picture

Don´t forget ...the government will just impose rent controls and higher taxes on rental incomes...it won´t be that easy..

Wed, 04/11/2012 - 14:33 | 2335308 PayneNita
PayneNita's picture

my classmate's sister makes $62 hourly on the laptop. She has been unemployed for 5 months but last month her pay check was $13843 just working on the laptop for a few hours. Read more on this web site ....  http://bit.ly/FPPP3j

Tue, 04/10/2012 - 17:38 | 2332903 SHEEPFUKKER
SHEEPFUKKER's picture

END THE FED

Tue, 04/10/2012 - 17:58 | 2332953 Sudden Debt
Sudden Debt's picture

YES... IT'S TIME FOR A NEW LOGO....

Tue, 04/10/2012 - 18:08 | 2332973 BKbroiler
BKbroiler's picture

ha

Tue, 04/10/2012 - 18:15 | 2332982 SheepDog-One
SheepDog-One's picture

They've already got their new logo, 'World Central Bank'. Soon.

Tue, 04/10/2012 - 22:35 | 2333446 palmereldritch
palmereldritch's picture

Where are my detonators?!

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

Tue, 04/10/2012 - 17:39 | 2332905 NotApplicable
NotApplicable's picture

Independent? Of what? Certainly not the Rothschilds.

Tue, 04/10/2012 - 17:53 | 2332942 bank guy in Brussels
bank guy in Brussels's picture

Yes, 'Independent of what?' -

That's what I thought when I saw this article title. You mean those central bank guys were actually independent once? Weren't beholden to a national or international bankster community? How did we all miss it? Ha!

 

Tue, 04/10/2012 - 18:27 | 2333014 Cursive
Cursive's picture

@Not Applicable

Exactly. The question here is who is in charge. The Credit Suisse guy tries to perpetuate the myth that the bankers should not be beholden to politicians. In reality, the Creature from Jekyl Island is pulling all of the muppet's strings. I'd like to declare freedom from our banking overlords.

Tue, 04/10/2012 - 17:39 | 2332907 Snakeeyes
Snakeeyes's picture

Interesting. I spoke today at Brookings with Ed DeMarco. http://www.c-span.org/Events/C-SPAN-Event/10737429760/

Someone from the Chinese Embassy approached me about some debt deal between China and the Obama Administration.

WTF?

I had to run to Fox News for an interview. What was this guy talking about? 

http://confoundedinterest.wordpress.com/2012/04/10/fhfas-demarco-no-trial-principal-reduction-yet/

Tue, 04/10/2012 - 17:47 | 2332924 bank guy in Brussels
bank guy in Brussels's picture

Bruce Krasting on ZeroHedge has been covering Ed DeMarco quite sharply for several years now - lots of articles. Check the search box.

Tue, 04/10/2012 - 17:41 | 2332909 Paul Atreides
Paul Atreides's picture

It's too bad we couldn't just force governments globally to raise the interest rates a couple points. The whole thing would implode, we could jail the banking cabal, we could get back to honest commodity backed money and a 'real' economy.

Tue, 04/10/2012 - 17:44 | 2332919 Sudden Debt
Sudden Debt's picture

Just click your heels Dorothy! 3 times!

Tue, 04/10/2012 - 18:00 | 2332925 Paul Atreides
Paul Atreides's picture

Considering that Dorothy's slippers were made of silver in the original 'Wizard of Oz' book and meant to symbolize a return to honest money I'll take that as a compliment.

Tue, 04/10/2012 - 21:26 | 2333341 Wakanda
Wakanda's picture

Oh, Auntie Em, there's no place like home!!

Tue, 04/10/2012 - 17:40 | 2332911 The Swedish Chef
The Swedish Chef's picture

It´s cold, hard facts like this that makes precious metals such a non-worry for me. Interest rates just can´t be allowed to go up, anywhere. Additional easing will come, if not from the FED from somewhere else. Print, print, print and we´ll see each other at the bottom. Our PMs will by then have rocketed but that is not a concern for the owner of them, is it?

Tue, 04/10/2012 - 19:12 | 2333099 SeverinSlade
SeverinSlade's picture

The central bank of Mars is considering QE.

Tue, 04/10/2012 - 17:42 | 2332915 Dr. Engali
Dr. Engali's picture

Defaulting and not renewing the Feds charter is the only solution.

Tue, 04/10/2012 - 17:43 | 2332917 Sudden Debt
Sudden Debt's picture

Thank you and GOODBYE......

Tue, 04/10/2012 - 17:47 | 2332927 Snakeeyes
Snakeeyes's picture

Here is the DeMarco transcript. Watch the question about China near the end of the panel Q&A.

http://www.brookings.edu/events/2012/0410_housing_demarco.aspx

Tue, 04/10/2012 - 17:49 | 2332935 Bam_Man
Bam_Man's picture

You don't say!

Tue, 04/10/2012 - 17:49 | 2332936 The Continental
The Continental's picture

"Fiscal agents of the state" is a euphemism for collection agency. This country is being killed by euphemisms, such as QE which is money printing and latent currency destruction. The projections by the CBO are worthless. Events are far too fluid and unstable to make projections beyond a few weeks or months. Long term (~2-3 years) the US and EU economies are imploding and disintegrating. Tax revenues will drop further as rates are raised, and that is a Laffer matter. If you don't hold physical gold and silver outside of any bank, deposit box or custodian, you will be wiped out. Governments will grab everything and anything not nailed down to stay fiscally afloat. They will devalue the currency by decree. When that is not enough, they will nationalize gold and sieze the mines. Governments never make an honorable exit when their failure is obvious to all; they go on a rapacious rampage. 

Tue, 04/10/2012 - 18:14 | 2332980 akak
akak's picture

I guess you got downarrowed by Ben Bernanke --- I don't know why anyone else would have done so.

Tue, 04/10/2012 - 18:51 | 2333049 XitSam
XitSam's picture

-2 now so Geithner must have voted too.

Tue, 04/10/2012 - 17:51 | 2332939 skepticCarl
skepticCarl's picture

I fully agree with the author's contention that independent central banks are, or will be very shortly dead, and become policy tools of their respective governments, for the reasons stated in the article.

As much as we like to vilify whoever is the current Fed head, it is obvious that he is playing the role intended.  Even "ending the Fed" would simply transfer that role to some new bureaucracy, or institution, under control of the government.

There is no chance that the U.S. government will someday simply revoke the Fed's charter, and return to something like pre 1913 conditions.  There is a chance that all hell breaks loose, and that the government nationalizes the central bank outright, but are there any ZH readers who expect that this would result in an improvement in monetary policy?

Tue, 04/10/2012 - 18:13 | 2332979 spinone
spinone's picture

read Currency Wars by Jim Rickards

Tue, 04/10/2012 - 18:21 | 2332993 Big Slick
Big Slick's picture

Rickards' interview a while ago on Chris Martenson's site is awesome!  I just listened to it again while running.

Rickards belief with regards to the US dollar as a world reserve currency... "THERE IS NO PLAN B."

Gold is the default reserve. 

David Stockman says we are reverting to gold as the reserve whether the FED wants to or not.

 

Tue, 04/10/2012 - 19:15 | 2333102 smlbizman
smlbizman's picture

i have recently started to feel that rickards is a little to perfect....i wonder...

Tue, 04/10/2012 - 18:59 | 2333064 Brindle702
Brindle702's picture

Currency Wars by Sung Hung Bing is the one we need a translation for

Tue, 04/10/2012 - 17:56 | 2332948 SIOP
SIOP's picture

Central Banks are just fine. It will go like this,

1. Bank Holiday declared.

2. New devalued currency issued.  (thus debts reduced substantially)

3. Central banks resume operations.

4. Repeat steps 1 thru 3 again in the future when needed.

Tue, 04/10/2012 - 18:13 | 2332978 SheepDog-One
SheepDog-One's picture

Right, independant central banks die, as planned, and into 1 central world bank next. Along with the 1 world central govt and 1 world currency when it all melts down and WW3 yadda yadda.

Tue, 04/10/2012 - 19:15 | 2333103 SeverinSlade
SeverinSlade's picture

Me thinks WW3 comes before global government.

Every single dystopian movie/TV show/book has the same theme.  Massive social unrest, war, and the solution is a police state, central global government.

WW3 coming after the "solution" destroys the need for the prison control system.  After all, if your government can't protect you...then why do you need it?

Tue, 04/10/2012 - 21:25 | 2333339 Marginal Call
Marginal Call's picture

Why waste all that gas, food, and ammo on a global war?  They're all in cahoots and that would be an expensive show. 

 

This time around, war just doesn't make sense.  Just starve everyone. 

Tue, 04/10/2012 - 18:17 | 2332985 vegas
vegas's picture

Interest rates "must be kept as low as possible"? How about interest rates "can NEVER be allowed to rise again." Like ever dude. The money printing and inflation that will be generated if Chalky Soetero is reelected will boggle the mind before the ponzi collapses.

 

http://vegasxau.blogspot.com

Tue, 04/10/2012 - 18:30 | 2333016 SheepDog-One
SheepDog-One's picture

Yep, they built it all up starting in 2008 with 0% interest free trillions, and now can never let it go up over 0%  or it all immediately implodes.

Tue, 04/10/2012 - 18:22 | 2332995 skipjack
skipjack's picture

" independent central banks are, or will be very shortly dead, and become policy tools of their respective governments"

 

Independent of the state - really ?  Who ever thought that, who had any reason ?  Without state debt, there is no reason for a central bank.  Without state debt, there's no reason for the state to need income taxes to pay interest.  Did all of you miss that obvious connection ? Clearly, there's a lot of waking up going on around here.  There wouldn't be state debt, if it wasn't for the central bank.

 

The statists and the central banksters have always needed each other.  Always.  Even Marx was funded by banksters.

 

Wake up folks, time is getting short.

 

 

Tue, 04/10/2012 - 18:40 | 2333034 Dre4dwolf
Dre4dwolf's picture

The govt eats your money, then regurgitates it, you collect the vomit, and then feed it right back to them, and then they regurgitate it again.

As long as it keeps coming out the front end, im ok with it, i aint scraping up shit money , but ill sure love to watch our govt officials eat their own shit.

Tue, 04/10/2012 - 18:41 | 2333037 NewThor
NewThor's picture

Hey. Tyler.

You should post the TimeWave Zero chart overlayed against the Dow Jones chart.

It's pretty freaky, bitchez.

Tue, 04/10/2012 - 19:09 | 2333075 HD
HD's picture

TimeWave Zero? Isn't that some hippy-dippy new age thing?

EDIT: Googled around. Really, end of the world crap? Do you know how many people in the past two thousand years have predicted the end of the world?

Tue, 04/10/2012 - 21:27 | 2333343 Ned Zeppelin
Ned Zeppelin's picture

One thing is sure - Armageddon is a notorious no-show.

Tue, 04/10/2012 - 18:48 | 2333044 XitSam
XitSam's picture

"...$1 trillion a year (or $5 billion per day)."

What? $5 billion x 365 = $1.825 trillion / year.  Or are they using metric years that only have 200 days / year?

Tue, 04/10/2012 - 18:51 | 2333050 sschu
sschu's picture

era of independent central banks is closing as those institutions revert to their foundational role as fiscal agents of the state.

... it has already closed.  The Fed is the financing arm of the Federal Government who has no intention of changing their spending habits to live within the means of the country.  The Fed of course is happy to provide this financing, in exchange for a compliant regulatory structure “monitoring” the money center banks and access to lawmakers at the highest level.

There is a symbiosis between the Federal Government and the Federal Reserve (and by implication Wall Street) that insures the only way to engender change is by a reset.  How long until and how it collapses is all that is to be determined at this point.

sschu    

Tue, 04/10/2012 - 19:05 | 2333079 robertocarlos
robertocarlos's picture

There are rumours of the Canadian Central Bank raising interest rates.

Tue, 04/10/2012 - 19:06 | 2333083 q99x2
q99x2's picture

Hell with central bank fiat. I want my bitcoin.

Tue, 04/10/2012 - 19:20 | 2333113 XitSam
XitSam's picture

Yeah, but what happens when you lose all your bitcoins in a tragic boating accident?

Tue, 04/10/2012 - 19:08 | 2333086 Pool Shark
Pool Shark's picture

 

 

Since when have Central Banks ever been "independent"?

Tue, 04/10/2012 - 20:05 | 2333208 youngman
youngman's picture

He is right that the Central Banks can never let interest rates rise again...no more bond vigilantes...so print it will be...and its easier on the Politicians because they can blame someone else for the runaway inflation...probably pass price controls again...but in all of our conversations we talk about how it used to be as our base year....there are new and better and soon to be bigger players in the world...Take China..I bet they surpass the USA in 5 more years GDP wise...they do not like the dollar as a reserve currency...and they are buying gold..and gold miners...they want it all...and my bet is that they will have it...add in Russia..South America...and 30 more countries and the Western world gets smaller all of the time...they are going right around our train wreck....but we still think we are in charge...what I do not know is will it be 5 years..or 1....it could happen that fast

Tue, 04/10/2012 - 20:10 | 2333224 logicalman
logicalman's picture

interest rates fell faster than debt went up!

AAARRRGGGHHHH!!!!

Tue, 04/10/2012 - 21:23 | 2333337 Ned Zeppelin
Ned Zeppelin's picture

Trust me the FED does not represent the interests of politicians, but rather of those behind the curtain who control the politicians.  It is the 4th branch of government, representing the interests of the elites.   The monetization of the debt is not happening because those interests want to support the government, it is because they  control the government and see no reason to end the party just yet.  Monetization of debt is a funny thing - the debt does not go away, actually, it magically and rather painlessly increases - the ultimate credit card.    And when it gets big enough, it will be time to stop, and then, utilizing all of the coercive power of the state and confiscatory taxation, it will be time to collect.  But there is yet hope, for a revolution .  . . .

Tue, 04/10/2012 - 22:05 | 2333398 Tom Green Swedish
Tom Green Swedish's picture

Brazil's 10 year bond is 12 percent. GDP has remained the  same.  It appears the USA government is taking advantage of their dirt cheap interest rates.  Can I please have my 30 percent APR credit card now?

Tue, 04/10/2012 - 22:24 | 2333426 AndrewCostello
AndrewCostello's picture

We can't afford our future because we are too busy paying for the past.  The baby boomers have destroyed us by bowing down to the fraud of Wall Street.  Pure and Simple.

 

Read this and get out of the system.

http://www.amazon.com/Simple-Wealth-Mr-Andrew-Costello/dp/1463523017/ref

Tue, 04/10/2012 - 22:47 | 2333459 Pairadimes
Pairadimes's picture

As bad as these charts look, I'd like to see a projection for federal debt interest expense using these deficit projections and run out a few decades, and then recalculated with interest rates assumed to return to historical average. Probably a pretty powerful emetic. Should leave us about $1.38 to split between Defense, Medicare and Social Security by about 2030. Then we can talk about what this means right up until the shooting starts sometime next week.

Tue, 04/10/2012 - 23:52 | 2333601 DaveA
DaveA's picture

As much as government loves central banks, reality will destroy them. If e.g. Ben Bernanke prints 100 quadrillion dollars on March 13, 2016, no one will notice or care, because those dollars won't buy a loaf of bread. People will use precious metal for face-to-face trade and Bitcoin for long-distance trade, all untraceable and untaxable.

The economy is in limbo now because everyone's waiting to see who gets the next bailout. Not until paper money is dead can we hit bottom and begin to recover. Banks and cities will have no debt and no money, but they'll own millions of foreclosed homes, offices, factories, and shopping malls, all priced for quick sale. If you open a factory and pay the police a modest fee, you'll be exempt from all wage, health, safety, and environmental laws.

It will be the greatest outbreak of freedom since 1989, though once again, pensioners will get totally screwed.

Wed, 04/11/2012 - 00:21 | 2333633 Jumbotron
Jumbotron's picture

Here's the worst part of this.

The longer the Fed waits to raise interest rates, the higher the debt gets, even without money printing.

Now let's say interest rates go to 4% which is historically low for most of our history, but it goes to 4% when our debt reaches 20 or 25 Trillion instead of 15 trillion....the jump in interest payments alone because of the higher debt amount when it does kick in will be a killer. 

And yet...once the Fed does this, they kill the equity markets and all those paper mache' profits go poof and people will be burning their iPads in the living rooms of their foreclosed homes.  Keep interest rates near 0 and you get all sorts of malinvestments and kicking cans down the road until it all goes KAPOOM when interest rates have to go up to hyperinflate ourselves out of this trap.

2020-2025 is my best guess when it all goes KAPOOM !

But if a Black Swan decides to fly over and take a dump on our heads then 2016 looks pretty good too.

Wed, 04/11/2012 - 10:21 | 2334360 XitSam
XitSam's picture

I think black swans are guananteed to happen.

Wed, 04/11/2012 - 03:54 | 2333834 Sandmann
Sandmann's picture

The real question is the Revenue side and how much is derived from Consumer Taxes, how much from Income Taxes, how much from Windfall Taxes (CGT), and how much from Poll Taxes because in the absence of Tariffs there is no way to reduce Imports without reducing Consumer Tax Revenues. The US economy like the UK is bloated on the Spending Side sustaining unreasonably high levels of Consumption relative to Production and Productivity. Hence there is no way to avoid a Crash and the question is simply who bears the Costs of Collapse.....so far the System has chosen to prise the fingers of the marginal from the lifeboat. It has not yet been decided which of those in the lifeboat will be eaten first........the real Cannibalism is yet to come

Wed, 04/11/2012 - 08:23 | 2334046 AnAnonymous
AnAnonymous's picture

the real Cannibalism is yet to come

__________________________________________________

Indeed. So far, US citizens have not yet eaten real human beings, human beings like them, only sub human beings and non human beings.

Wed, 04/11/2012 - 16:22 | 2335742 akak
akak's picture

So far, US citizens have not yet eaten real human beings, human beings like them, only sub human beings and non human beings

Such as nose-picking, roadside shitting, running dog imperialist chinese citizenism citizens?

Make me laugh!

 

PS: I hear that chinese citizens taste like pork --- but after eating one, you are always hungry again a couple of hours later.

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