The Central Planners are at it again, Fellow Reckoner. Greasing the gears…feeding the engines…and speeding headlong and strapped to their seats towards the next crisis.
Leaders of two of the world’s largest criminal organizations gathered in Washington, D.C. last week for the World Bank/IMF Spring Meetings. The Mob fête was attended by all the usual suspects…central bankers…trade secretaries…finance ministers…policy wonks and assorted other rapscallions and reprobates.
Their wooden pledges sounded nice enough…
US Treasury Secretary Jack Lew called for ‘universal women’s empowerment’. World Bank President Jim Yong Kim called for ‘universal education’. As for the IMF’s own Managing Director, Christine Lagarde, madam had ideas of her own:
‘What we need is a full-speed global economy,’ she told the audience, ‘growth that is solid, sustainable, balanced, but also inclusive and very much rooted in green developments.’
‘Why stop there?’ we wondered. Why not promise strawberry ice-cream for the elderly…and winning lottery tickets for all inner city families of five or more…and high-speed Internet for orphans…and…and…and…
It’s easy to make pledges, Fellow Reckoner, to promise every downtrodden dolt and hard knock story something for nothing. The hard part comes in actually paying for it all. As everyone knows, strawberry-flavoured Internet lottery jackpots don’t come cheap!
And yet, the powers-that-won’t-stop-being don’t seem overly concerned in the face of this inconvenient accounting truth. Shocker! Their masterly payment plan is, to quote the Talking Heads, the ‘same as it ever was’.
As we remarked in these pages, the Fed, the BoE and the ECB are providing a massive ‘jolt’ of freshly inked currencies to their respective economies, hoping to prop up optimistic asset prices. The rate of expansion is, says Bill Bonner, ‘unprecedented in world history.’
We’re talking, of course, about ZIRP, QEI, QEII, Operation Twist (OP) and other such dubious, acronymic concoctions. All the tools’ tools, in other words.
But wait! Doesn’t EZ money policy lead to rank malinvestment and moral hazard…the exact same recipe that baked the world economy into such a sordid mess the last time? Well, yes.
As CounterPunch’s Mike Whitney explains, using this graph:
‘Investors have boosted their borrowing to near-record levels to load up on stocks. The last time that margin debt was this high was just before the bubble burst in 2007. In January, New York Stock Exchange (NYSE) margin debt tipped $366 billion, just shy of the 2007 peak of $380 billion. The Fed’s zero rates and $85 billion per month bond buying program (QE) have sparked the same irrational exuberance that preceded the Crash of ’08. Investors are piling on the leverage because they feel confident that Fed chairman Ben Bernanke will not allow markets to fall too sharply. (This is called the Bernanke Put.)’
Sceptical Reckoners might be wondering, therefore, how do these Ph.D. ponies know where they’re going? How do they know their ‘extraordinary’ measures will work? Even by their own admission, they don’t.
Speaking at the same D.C. gabfest, Lorenzo Bini Smaghi, a former member of the European Central Bank’s executive board, admitted, ‘We don’t fully understand what is happening in advanced economies.’
Yes, Mr. Smaghi, we all know that you don’t know what you’re doing. Rest assured, your ignorance was never in question. It is your – and your colleagues’ – arrogance that is on trial.
Like Smaghi, Sir Mervyn King, the outgoing governor of the Bank of England, must have been caught off-guard when he let it slip that, ‘there is the risk of appearing to promise too much or allowing too much to be expected of us.’
Again, Sir King (…Jr. III Highness Earl Duke etc.), let us repeat: Far from expecting too much from you, we would happily settle for nothing at all. In fact, we want nothing from you. No cure-all levers. No magic buttons. If only you and your meddlesome ilk could stay your chubby little hands. Alas, the possibility of aggressive inaction seems unlikely to prevail…
Reports CNBC: ‘The IMF was clear in its global financial stability report that it did not want to see an end to the extraordinarily loose monetary policy being implemented across rich countries.’
José Viñals, the IMFs head of financial stability, even went so far as to claim that central banks’ efforts were ‘absolutely necessary’.
And so, as their engines careen toward the precipice, the central planners busily shovel loads of blind incompetence into the blazing hot furnaces of their own ego. ‘Full steam ahead!’ they holler. ‘Full steam ahead!’
for Markets and Money
From the Archives…
Why Too Much Data Might Actually Protect Your Privacy
19-04-13 – Sam Volkering
This Gold Bug Ain’t for Turning!
18-04-13 – Bill Bonner
Music for Contrarian Ears
17-04-13 – Dan Denning
Bring on the Gold Correction
16-04-13 – Bill Bonner
Why China’s ‘Population Pagoda’ Could Mean Slower Growth for Australia
15-04-13 – Dan Denning
You must download and read this report NOW.
As of 1 January, 2017, the Australian government will introduce harsher asset test changes that could affect your income.
Inside your free report, rogue economist Vern Gowdie reveals what he believes you could do right now to boost your age pension income. If you’re at, or near, retirement age…download Vern’s report today.
- Three ways you could boost your age pension payments now: Trying to squeeze a few extra bucks out of the government can be like drawing blood from a stone. It’s HARD. Fortunately, Vern’s discovered three ways you could boost your age pension payments (number #3 will surprise you).
- Will you be hit by the age pension changes in 2017: As of 1 January, 2017, the Australian government will introduce a series of harsher asset test changes for the age pension. Will your income be hit by the new changes? Download Vern’s report to find out.
- Retire in luxury overseas (on the cheap): An increasing number of Aussies are packing up and moving overseas to retire. No wonder. Your total living expenses in an exotic location like Thailand or Costa Rica could be HALF what you’d expect to pay here in Australia. Cheap food, rent and medical costs are just some of the reasons waves of retirees are heading for warmer climates permanently. How does a shift overseas affect your pension entitlements? Vern explains in his report.
To download your free report, ‘What You Need to Know about Changes to the Age Pension’, simply subscribe to Markets and Money for FREE today. Enter your email in the box below and click ‘Send My Free Report’.
You can cancel your subscription at any time.