The Even Nuttier Professors — Starring Janet Yellen and Mario Draghi

Markets are in watch and wait mode.

This is the week when the inept get centre stage. Markets are awaiting the next episode in the monetary madness show.

The Laurel and Hardy of economics — Japanese PM Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda — are to give us their latest comedy double act later today.

More printed yen. More bond buying. Lower interest rates. More stimulus spending…surely there must be a creek they haven’t put a bridge over yet. Helicopter money.

Who knows what slapstick economic routine these guys have been practising?

All their previous economic jokes have failed to generate any lasting feel-good effect in the Japanese economy. But they will persist.

Why? Because Laurel and Hardy think the crowd just doesn’t get their humour.

Laurel says to Hardy, ‘If we keep telling the same old tried and tired jokes — only louder and with more gusto — perhaps the audience will get it and, in their heightened state of happiness, they’ll start spending’.

Now what Hardy — who, by the way, is turning 72 in October — should be saying to his clueless partner is: ‘The latest census shows that 27% of the Japanese population is aged 65 and over. Perhaps these days — especially with negative interest rates reducing their savings to dust — they don’t see the funny side of life so much’.

The reality is that Abe and Kuroda are nothing more than the warm-up act to the Fed’s Phyllis Diller — aka Janet Yellen.

Phyllis — sorry Janet — is likely to stand there on Friday with a straight face and say ‘we were just kidding about a rate rise…fooled ya’…and then break into that high pitched laugh of hers. Actually, that last bit does stretch the imagination a little…I think the only time Yellen breaks into a smile is when her thoughts turn towards her cushy post-Fed Wall Street gig. Big bucks with little responsibility…that would raise the corners of anyone’s mouth.

The trouble for the central bank comedians these days is that more and more people are laughing at them, and not with them.

They are being seen for what they are…comics dressed up in business attire.

People are starting to mock them because they clearly do not have a clue on how to fix the (even bigger) problem they’ve created. These comedian bankers live in this world of delusion where they believe that they alone can make an economy function in accordance with textbook theories…the ones they helped co-author.

If Eddie Murphy decides to do a sequel to ‘The Nutty Professor’, his casting agent should look no further than the current crop of central bankers. I can see the billboard now — Janet Yellen and Mario Draghi with a supporting cast of Kuroda, Carney et al. starring in ‘The Even Nuttier Professors’.

Whatever vaudeville announcements are made this week — big or small — it makes little difference in the long run.

No doubt, in the short term, markets will jump one way or the other, but as we’ve seen with these previous comedy routines, the laughs fade away as reality sets in.

The reality is that the economic party pooper — deflation — is a riddle they are ill-equipped to understand, let alone solve.

Inflation was easy. Everyone laughed. Wages went up (at least in nominal terms). Asset prices increased. Tax revenues rose. Welfare entitlements became more expansive. The value of debt was continually watered down. People spent (money they did not have) now, not later.

What a jolly old world it was. Getting the crowd up and cheering was as simple as dropping interest rates a few percentage points. Take a bow, Alan Greenspan.

The crowd is now a little older, grumpier and feeling poorer (thanks to low interest rates and the threat their defined pension funds may not be able to pay them what they were promised in retirement). It’s getting harder for them to get overly excited about the future…particularly when it’s the actions of these comics that are destroying the value of their life savings.

Stanley Fischer, one of Phyllis Diller’s comedy team at the Fed, pretty much summed up why the comics (who think they are) running the show are as clueless as they are humourless.

When asked on Bloomberg TV by Tom Keene ‘…There is a raging debate about the efficacy of negative interest rates for central banks, for governments, and again for banking itself. What about the efficacy of negative rates for savers and the people of these different nations?

Fischer’s reply:

Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But we consider all that and we have to make trade-offs in economics all the time and the idea is the lower the interest rate the better it is for investors.

Got that? Savers are an economic trade-off.

The bozos at the Fed are there to keep Wall Street entertained with…quite decent equity prices.

Savings are the foundation upon which an economy is built…or have the comedians forgotten that little bit of economic theory?

Don’t take my word for it; here’s what the Comic (sorry, Commander)-in-Chief had to say at Georgetown University on 14 April, 2009 (a matter of weeks after he was first inaugurated):

We cannot rebuild this economy on the same pile of sand… We must build our house upon a rock. We must lay a new foundation for growth and prosperity — a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.

— US President Barack Obama

This isn’t the first time he’s been able to deliver his lines with a straight face. In March 2006 — when voting on whether to raise the US debt ceiling — the then-Senator Barack Obama said:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US government can’t pay its own bills… I therefore intend to oppose the effort to increase America’s debt limit.

The hypocrisy between what is said and what is done does bring a wry smile to your face. The comics taking themselves so seriously proves that they do have a sense of humour, albeit a twisted one.

When Obama took over running the comedy show, US public debt was US$10.6 trillion (that’s trillion with a T). When he leaves office in January 2017, the public debt figure will be close to US$20 trillion. Doubling the debt (while interest rates have plumbed to historic lows) in the space of eight years deserves a round of applause.

Barack might be leaving the crowd smiling — only because they know his replacement is a choice between Dumb and Dumber — but history will not treat his debt legacy joke as all that funny.

All jokes aside…

The world has serious debt issues that are only being compounded by a deliberate strategy to erode the value of savings. The central bankers are not the solution; they are the problem.

The consequences of these comedic attempts to solve a debt problem with more fanciful ways to create more debt are serious…very, very serious.

You would think these people are here to entertain you, keeping you in the comfort and style of life you’ve become accustomed to.


You, dear reader, are destined to be the butt of their jokes.

These comedians are deadly serious in their determination to recreate a fantasy world of never ending growth achieved on the back of never ending debt accumulation.

Their absolute commitment to having the last laugh is not funny.

To avoid being a victim of this sick joke, I implore you to take a serious look at your financial situation.


Vern Gowdie,
For Markets and Money

Vern Gowdie has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners. His previous firm, Gowdie Financial Planning was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser (IFA) magazine as one of the top five financial planning firms in Australia. He has been writing his 'Big Picture' column for regional newspapers since 2005 and has been a commentator on financial matters for Prime Radio talkback. His contrarian views often place him at odds with the financial planning profession. Vern is is Founder and Chairman of the Gowdie Family Wealth advisory service, a monthly newsletter with a clear aim: to help you build and protect wealth for future generations of your family. He is also editor of The Gowdie Letter, which aims to help you protect and grow your wealth during the great credit contraction. To have Vern’s enlightening market critique and commentary delivered straight to your inbox, take out a free subscription to Markets and Money here. Official websites and financial eletters Vern writes for:

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