Albert Edwards: "Citizen Rage" Will Soon Be Directed At "Schizophrenic" Central Banks

Perhaps having grown tired of fighting windmills, it was several weeks since Albert Edwards' latest rant against central banks. However, we were confident that recent developments out of the Fed and BOE were sure to stir the bearish strategist out of hibernation, and he did not disappoint, lashing out this morning with his latest scathing critique of "monetary schizophrenia", slamming all central banks but the Fed and Bank of England most of all, who are again "asleep at the wheel, building a most precarious pyramid of prosperity upon the shifting sands of rampant credit growth and illusory housing wealth." 

Follows pure anger from the SocGen strategist:

These of all the major central banks were the most culpable in their incompetence and most prepared with disingenuous excuses. And 10 years on, not much has changed. The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere. The credit bubble is everyone’s fault but theirs.

First, some recent context with this handy central bank holdings chart courtesy of Deutsche Bank's Jim Reid which alone is sufficient to make one's blood boil.

For those familiar with Edwards' writings over the years, the gist of his note will come as no surprise: after all, how many different ways can you say that central banks have broken the market, have caused a credit bubble, and will be responsible for the crash when they finally run out of cans to kick.

In any event, the focus of Edwards' latest note is the resurgent growth in unsecured household credit.

We have written on this topic before in the context of US and UK economic growth only being sustained by sharp declines in household saving ratios. But though I must revisit the issue after the UK?s Guardian newspaper (for non-UK clients it is similar to The New York Times) ran a huge feature on the desperate situation many of the JAMs (just about managing) now find themselves in - see article here.

Edwards points out the increasingly easy terms offered on unsecured consumer debt, i.e., credit cards and notes that he has "heard stories of credit card loan search engines spewing out money on 4 year, 0% teaser loans. What really shocked me is that after having been offered a credit card loan facility via a search engine, one is able to make multiple further self-certified applications and be offered similarly large amounts! Amazingly there was no question about existing debts!"

Edwards concedes that credit growth in a zero interest rate world is hardly surprising, and certainly "this debt time-bomb is specific to the UK."

We are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers? throats. They did it in 2003-2007 and they are doing it again. Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US).

But the catalyst that pissed Edwards off the most this time around, is the observed reaction from the BOE, which on one hand is railing against the current leveraging trends, and on the other is doing everything it can to encourage it, making Carney?'s cautious statements about consumer credit "look ridiculous and takes BoE monetary policy to a new level of schizophrenia"

Rather than the bubble itself it is the reaction of the BoE that I find most bizarre. Mark Carney warns darkly that ?banks are forgetting the lessons of the past? and he recently increased bank capital requirements on consumer loans.

 

But as Ed Conway of Sky News points out, at the same time it is warning of a consumer credit bubble, the BoE has just increased its programme of lending to banks at preferential rates to increase bank lending in things like, yes you?'ve guessed it, consumer credit! As Ed says, this is like having your foot on the brake and the accelerator at the same time. This makes Governor Carney?s cautious statements about consumer credit look ridiculous and takes BoE monetary policy to a new level of schizophrenia.

His conclusion is the same as that from three months ago, when Edwards, clearly sick and tired of the whole affair, predicted that it is only a matter of time now before the populace revolts against those who are truly responsible for its sad plight, and "citizens'? rage will be directed where it belongs" - at central banks.

The simple fact is monetary policy is way too loose in the UK as well as in the US, and let us not forget the BoE cut rates in the immediate aftermath of last July?s Brexit vote. Bubbles are appearing in areas like consumer credit because interest rates are far too low and need to be raised. And yes, when interest rates are excessively low, both borrowers and lenders do stupid things. But to ignore their own role in creating debt misery for millions, the BoE can only deal with its own cognitive dissonance by blaming someone else. When this debt bubble blows, I suspect citizens? rage will be directed where it belongs

We are far less optimistic that this will be the final outcome in a world in which a no less than 30% of Americans think the Federal Reserve is a national park...

Comments

E.F. Mutton Thu, 09/21/2017 - 10:40 Permalink

No it won't.  The average citizen has no clue what Central Banking has "accomplished"The Media Industrial Complex will provide them with the approved scapegoats for their rage, as usual.

Folkvar Solio Thu, 09/21/2017 - 12:40 Permalink

When it all comes down in the UK the establishment criminals will just blame Brexit and the remainers will fall over themselves to believe it creating huge division and resentment between the population not the bankers. It wouldn't surprise me if they set Brexit up for that purpose. The bankers always get away with their criminality because the vast majority of people are dumb beyond words. 

In reply to by Solio

conraddobler Thu, 09/21/2017 - 10:46 Permalink

Rage is what they want.Instead withdraw all consent.Do not consent, make them kill you, publicly execute your or disapear you or whatever they want to do but never consent.  They want your soul, deny them that and you deny them everything.My soul for now and forever belongs to the creator of it.  They can not have it, now, tomorrow, or ever.End of story.

Herdee Thu, 09/21/2017 - 10:53 Permalink

Money printing at levels never seen before will happen. Don't forget that Trump is the master of debt and has complete control over the federal reserve. They have no choice, already they are monetizing the debt. It's just the start. Any stock market implosion, the need for more war and more money for the jail system and health care will be met with unlimited stimulus. Fasten your seat belts for hyperinflation folks. She's a big monster on the verge of collapse, there's no choice but to print infinetly.

Cloud9.5 Herdee Thu, 09/21/2017 - 11:18 Permalink

You are on the money.  Pun intended.  Given a choice between main street burning down today or it burning down some time in the future, the latter option will always be chosen by the connected.  Enjoy the moment.  The lights are still on.  There is food in the cupboard and there is still gas in the tank.

In reply to by Herdee

Clowns on Acid Herdee Thu, 09/21/2017 - 14:17 Permalink

Herdee - Agreed but there is a lot of distance between now and then.....I think. The Fed has been monetizing for years by reinvesting proceeds form the MBS and UST thery illeagally and Unconstitutionally bought in the market with money digitally printed out of thin air. Also allowing some debt to mature and then taking their 10% and the rest to the US Treasury.  Mugabe is laughing and giving himself another Zimbabwe State medal for innovation.However if the equity markets do tumble rapidly, Yellen has said that they will intervene...I think. Why didn't any of the ascot wearing pencil necked sheep ask her that question outright? Would they have been fired by their Bolshevik owned media companies?Why doesn't Bloomberg anal_lsts ask Yellen outright if the Fed buys equities and what is the level of their buying? We know that the Swiss Nat'l Bank has over $85 Billion of US equities.WHEN, not if, the people on the street start to hear that it IS really a Fed Ponzi game (you know when all the Fed stories from their drunk crazy Uncle ....are shown to be true) ...... then we have an opportunity for hyperinflation....but not before.So take a guess....when will that occur?

In reply to by Herdee

Anteater Herdee Fri, 09/22/2017 - 00:57 Permalink

Be sure you explain that the term 'hyperinflation' refers to the volumeof money in circulation, and not to the price of bread, crude oil, iron ore or copper, which are all collapsing. You should have bought cottonfutures before Harvey, but that's not price 'inflation' that's short supply and too much QEn $s chasing it. There's lots of ice cream down here.

In reply to by Herdee

Vlad the Inhaler Thu, 09/21/2017 - 11:18 Permalink

The average person has no clue what the Fed does.  Unfortunately they will direct their rage towards capitalism, because they can't tell the difference between that and crony capitalism, and that means the rest of us will probably have to fight the commies.

surf2liv Vlad the Inhaler Thu, 09/21/2017 - 13:50 Permalink

No one can believe that Wizard of Oz type Fed..  There is a man behind the curtain printing up dollars and givng them to his buddies..They can't believe our nemesis beyond the general Tribe is a guy that broke Brit Pound/DMark peg..and that with these illgotten gains he is funding all these minority groups against heterosexual relations that produce white kids..Their question would be "If you think that why hasnt anybody done anything against this rigged system?"Then you mention Germany..and they lose it

In reply to by Vlad the Inhaler

moonmac Thu, 09/21/2017 - 11:21 Permalink

The only chart our factory workers understand: Hiring Freeze  XPay Freeze  XPay CutsLayoffs They already know where the next "X" is going...

Anteater sleigher Fri, 09/22/2017 - 00:46 Permalink

Read Kropotkin's 'The Conquest of Bread'. Available free PDF.Everything we talk about here was discussed in the mid-1800s.Then the mercantilists of the North and their Bankers, put thesame sanctions on the South, that Trump is putting on NorthKorea. The banker debt from the Civil War, and the wealth thatwas stolen from Tsarist Russia by the Bolsheviks, founded Fed.For the next 100 years, we fought the Bankers Wars, and paidtheir blood tithes. The wealth of my great-grandfather...gone. The wealth of my grandfather...gone. The wealth of my father...gone. The wealth I accumulated on my own...gone. The $1of 1913 and Jekyll Island is just 2c today, they like to quote, butnobody is allowed to ask, what happened to our great wealth!?Where is it? Where is the generations of our labor?! Where is it?https://www.google.com/url?sa=t&source=web&rct=j&url=http://www.leeduga…

In reply to by sleigher

FreeNewEnergy Thu, 09/21/2017 - 11:40 Permalink

Play along.Borrow at will, at as close to 0% as possible. Buy silver and useful things - generators, tools, foodstores, etc.Pay back if possible, rinse and repeat.If not bankruptcy. Lost all that silver in a tragic boating accident. Sorry.Hit the reset button.One caveat. Stay relatively small and quiet. Use bankruptcy as a last resort only if the rest of the world, including stocks, is going down the toilet, because the rush to the BK courts will be massive and you will not matter to the "master(baters) of the universe."

aliens is here Thu, 09/21/2017 - 11:44 Permalink

Citizen rage my ass! People have Netflix, sports, movies and other stuff to keep themselves busy. They have no time to worry what Feds are doing to them. They are fking sheeple who deserves whatever they gets.

rp2016 Thu, 09/21/2017 - 11:50 Permalink

This is exactly the souce of my unhappiness with you ZH. If you are so convinced then why don't you take the FED down ... why are you suggesting that citizens should do it. You are inciting ... something... Why are you taking the video cam and broadcasting the ****? why don't you do anything... 

F em all but 6 Thu, 09/21/2017 - 11:51 Permalink

No. The dummed down public will be once again manipulated. We will be turned against each other. Civil War and America burns. Those that orchestrated this mess will hop on their private jets and evacuate. USA has been strip mined. Why would the culprits hang around?

redmudhooch F em all but 6 Thu, 09/21/2017 - 14:31 Permalink

No, you're wrong, the large majority of Americans know very well who is responsible for all the misery now.After being fucked by both 0bama and now Trump, look at the "types" both of them surronded themselves with, Wall St Banksters, MIC, Americans saw this, we know who the enemy is now, no doubt.Hence the media trying to pit black vs. whites, vs. browns, vs. police, and importing people that don't hold our same values.You think DACA was anything but a devisive political weapon to be used against us, to make us hate each other?

In reply to by F em all but 6

CHoward Thu, 09/21/2017 - 12:01 Permalink

NO it won't.  "Citizen rage" will never be directed where it truly belongs.  They'll kill their own before they figure out who really causes all their pain and anguish.

rex-lacrymarum CHoward Thu, 09/21/2017 - 15:47 Permalink

This is unfortunately correct. There are way too few people who even know what the central planners are doing, and even among those who do know, few truly understand the mechanisms in detail. I have noticed this countless times over recent years, particularly since QE was implemented. Even  trained economists often don't really understand how the system works. And even those who do understand the admittedly fairly complex interplay of the centrally planned fiat money system's mechanics, don't necessarily understand sound monetary and economic theory to the extent required to properly allocate blame. The average citizen certainly hasn't the foggiest idea. This is made all the more difficult by the fact that even most of the central planners themselves are basically economic illiterates.  They all went to the same prestigious universities, where they were all taught the same arrant statist mumbo-jumbo. Based on their statements and academic papers it is almost an apodictic certainty they simply don't know how the economy works. This is not necessarily their fault (leaving aside intellectual laziness), since economic science hasn't been about discovering truth for almost a century - instead it is all about serving the State. Most faculties are little more than etatiste indoctrination centers. Also, it must be suspected that economics (and other social sciences) are mainly attracting mediocre intellects these days, since these are as a rule not very demanding studies. The primitive mathematics (a truly pathetic attempt to make economics look more like physics), the superficial, easy to grasp (and utterly misguided) economic theories... let's just say you don't need to be a rocket scientist to learn this stuff.Having said all that, there are of course exceptions, even quite notable ones; original thinkers in possession of a foundation of sound economic knowledge haven't exactly died out just yet - but none of them have even the slightest influence on "policy" anywhere. As to the common man: sound economics cannot be explained in a few soundbites. It takes an effort to fully grasp how and why "boiling the frogs slowly" central bank policies are impoverishing the masses and what an important role unsound money plays in creating the growing misery of assorted debt slaves and tax serfs . Most simply don't have the time and energy to investigate these things in detail, as they are too busy trying to keep their heads above the water in a vain rearguard battle to maintain their slip-sliding living standards amid a proliferation of greedy parasites who brazenly appropriate more and more wealth by political means. 

In reply to by CHoward

Anteater rex-lacrymarum Fri, 09/22/2017 - 00:09 Permalink

Hey, bruh, the Bankers Coup of 1999, and Pentagon Coup of 2001changed everything, the way GLD/SLV destroyed the value of PMs.Learn, or die,...or keep playing the harpsichord, hoping for 17thC II.Whenever I read 'The Conquest of Bread' by Kropotkin, it's so sad.They're going to QEn to the last drop, then we'll all be wage-slaves.In the 70s we lived in big groups and bought food in bulk together,that created no wealth. It was just to have enough to feed the kids,so they didn't feel like refugees in their own land. Read Kropotkin. 

In reply to by rex-lacrymarum