Earlier this week we described the personal come to non-GAAP Jesus moment of trading commentator Richard Breslow, who confessed in no uncertain terms that he has had it with endless central banking intervention: "a portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly. The embedded flaw in this new logic is that central banks give investors perfect foresight. And nothing can go wrong... You don’t need to be a Taleb or Mandelbrot to calculate that we have been having once in a hundred year events on a regular basis for the last thirty years."
Today it is another famous skeptic, SocGen's Albert Edwards who has had enough and says he feels "utterly depressed" because he has not "one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!"
As he openly warns his readers :
"I have long recognised my own contrariness (or is it bloody-mindedness) and hopefully put it to good use in my chosen profession. If you want the consensus bull-market cheerleading nonsense, readers know it is amply available elsewhere."
With that warning in place, here is why the man who popularized the deflationary "Ice Age" blows up.
I am neither monetarist nor Keynesian. I see merit and demerit in both sides of a very fractious argument. But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB's policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!
We said in 2010 when the Fed launched QE2 that the ultimate outcome would be civil (or more than civil) war, so we thoroughly agree with Edwards "depression" because sadly he is right, but since stocks keep rising, few others seem to care.
Edwards' lament continues:
I?m not really sure how much more of this I can take. So here we are 5, 6 or is it now 7 years into this economic recovery and it still remains pathetically weak. And so it should in the wake of one of the biggest private sector credit bubbles in history. The de-leveraging hangover was always going to be massive and so it is. Quick-fix monetary QE nonsense has made virtually no difference to the economic recoveries other than to inflate asset prices, make the rich richer, inequality worse and make Joe and Joanna Sixpack want to scream in rage. They are doing so by rejecting the establishment political parties and candidates at almost every electoral turn and seeking out more extreme alternatives at both ends of the political spectrum. And who can blame them apart from the chattering classes?
I have just returned from Germany on a marketing trip. I absolutely agreed with their Finance Minister Schäuble when he blamed ECB loose money policies for contributing to the rise in the extremist right Alternative for Germany party. Schäuble, “said to Mario Draghi…be very proud: you can attribute 50% of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy,” And this is not just a German phenomena - it is a global one. The people are angry and they are lashing out. But central bankers have painted themselves into a corner with their overconfident rhetoric and monetary experiments. They have now committed us all to their road to perdition.
Finally for those convinced in central bank ultraomnipotence, Edwards has the following parting words:
As investors hung on the words of ECB chair Mario Draghi once again, I was reminded when reading the excellent monthly newsletter of Graham Summers at Phoenix Capital just how desperate Central Bankers will become once they are painted into a corner. Graham writes "Whereas another Central Banker might state, “we are ready to act if warranted,” Mario Draghi says things like he'll "do whatever it takes… and believe me it will be enough.” Bear in mind that famous statement was made entirely off-the-cuff as former Treasury Secretary Timothy Geithner revealed.
Geithner:[T]hings deteriorated again dramatically in the summer which ultimately led to him saying in August, these things I would never write, but he off-the-cuff - he was in London at a meeting with a bunch of hedge funds and bankers. He was troubled by how direct they were in Europe, because at that point all the hedge fund community thought that Europe was coming to an end. I remember him telling me [about] this afterwards, he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.Here is former Secretary of the Treasury, Timothy Geithner, stating openly that Mario Draghi had "no plan" and was simply bluffing when he claimed, "we’ll do whatever it takes.” Lets not kid ourselves, these "guys" are literally making it up as they go along!
Interviewer: This was just impromptu.
Geithner: Totally impromptu?. I went to see Draghi and Draghi at that point, he had no plan. He had made this sort of naked statement of this stuff. But they stumbled into it. (Source: Financial Times)"
There is little more to add, suffice that all of the above explains the relentless thrust by the mainstream media to pain central bankers as nothing less than supermen, or in the case of Roger Lowenstein's famous op-ed, "Heroes."