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Central Banker Right Think – The Imams Fight Back 

Politics / Central Banks Jun 18, 2014 - 02:32 PM GMT

By: Andrew_McKillop


Not Credible
The central banker fraternity has its own ideological Right Think, like the mob of Tea Towel Heads presently near Baghdad, but the UK glove puppet media has singled out Britain's central bank chief Mark Carney as “unreliable and out of line”. He supposedly infringed central banker right think but what he did wrong is as arcane as Sunni and Shia imams hairsplitting the doctrines of ibn Hanbal and al-Askari. In any case don't be mistaken. Carney is a fully paid-up member of the bankster fraternity. Attacking him is like attacking all the rest.

For some UK bankers and journalists, Carney has “lost all or most of his credibility” – which is everything to central bankers. Carney went on record in early June saying he wants to limit house price rises in the UK to the “awfully modest” rate of 10% a year. Every year. UK house prices are already among the most extreme in any developed country but talking like that is “bad thinking” by Carney!

Some journalists even contrast Carney with the ECB's Mario Draghi “seen as a central banker who holds to his word”. That is the first joke.

Draghi, the former Goldman Sachs director for Europe, recently upped the ante and passionately said he will do “everything needed to save the euro”. He uses exactly the same methods as other central bank chiefs, Carney included. Draghi is buying more junk securities from Eurozone “bad banks”. He is printing more chaff euros - but is now doing something other members of the central banking clique pretend they would “probably never do”. Until they do it. Draghi is taxing overnight deposits from banks to the ECB, at a rate of 0.10% per year, which isn't exactly punitive.

It is in fact pure petty-minded Keynesian symbolism but it means that in turn, maybe soon, all kinds of deposits – like personal savings accounts – could be taxed at a rate much, much higher than 0.10% per year. The slippery slope and the banksters say “there is no choice”.

Ranking the Banksters

What did Carney do wrong? Carney is small beer compared with the others. Ranking them by the bailouts and “Quantitative Easing” they all operate since 2008, we find that Ben Bernanke and Janet Yellen (recent past and present US Fed governors), Mario Draghi, and Bank of Japan governors since 2008, presently Haruhiko Kuroda, are all far ahead of Carney. The central bank chiefs of China and India shouldn't be ignored, either, but their action to “save the money” and save their own bad banks only started in full-blown earnest in 2012. In China's case, central bank chief Zhou Xiaochuan is now literally storming ahead.

Only when we compare the central banksters' money printing excesses and the badness of the banks they bail out with the size of the economies they squat upon, does Carney move up the ranking, alongside Kuroda. In absolute QE terms, the US Fed chiefs and Mario Draghi outstrip all the others combined but watch out for Xiaochuan!

Trying to find out exact numbers for how much money the central banksters have squandered on bad bank bailouts and general money printing “largesse” is difficult. One simple reason is when a central bank bails out a bad bank, the bank stays bad and instantly multiplies the chaff money bailout by “leverage”. By dozens of times, even 100 times, in the shape of “derivatives and related financial instruments”. All tradable and balanced on the knife edge of financial markets that have to rise. Must and can only rise, exactly like real estate prices. This is an iron law the central banksters have rammed through, whipped on by their Keynesian imams. No heresy is allowed. If not, if “the markets” declined by even 25%, the bad banks will lose so much that they will instantly become very bad banks, and we move back to 2008, quicktime. They will need very big new bailouts. As simple as that.

Not really so simple, in fact. After the 2008-09 market crash the central banksters said “never again” and they meant it, in their own bizarre way.

Another reason its hard to find out how much money they printed is their Herd Cult of lying. The 'Financial Times', June 15, reports they “secretly invested” an estimated $29.1 trillion (that is $29 100 billion) through 400 public institutions in world financial markets since 2008. No, they will never admit that.

In what we call 'nominal terms' the 4 major central banks of the developed countries – the US Fed, ECB, BOJ and BOE – have 'issued' maybe $12 000 billion since 2008. Some US finance journalists and academics estimate that only US Fed largesse since 2008 could exceed $6 000 billion. Don't forget the derivatives. If you want to know what that means, World Gold Council data for all central bank gold reserves puts this at about 31 300 tons, with a total value at today's gold price of about $1278 billion. If you only count notes and coins floating round the world, the US Federal Reserve Bank of New York estimates this at a mere $1 200 billion as of July 2013, and says the total amount of all US dollars circulating worldwide on a “M2 money base” are about $10 500 billion.

The best question is where did it all the banksters printed money go?

No problem. It went straight to the financial markets, including real estate markets after a short stay on the ledgers of the banks, insurance companies, brokers and other “market players”. The markets picked their favorite inflatable  assets – like real estate and Whats App – and nothing much else. Of course the central banksters pretend they are “not directly concerned” by ever-growing real estate and equity market prices, or commodity markets and financial derivatives market prices. They affect unconcern. They claim their own excesses and financial market excesses are “unrelated” to frenetic speculation on the markets which they claim do not have to turn down and “come off the boil”. In fact they can never crash. The central bankers said “never again” in 2008. Never again!

Out Keynesianizing The Keynesians

So why pick on Carney who is exactly like the others? Its an incredible accusation to claim he somehow “out-Keynesianed the Keynesians” by daring to talk about UK house prices being capped at a paltry 10% a year, every year but this is his supposed primal fault. He had actually linked this somber Soviet-style cap on real estate price rises with fighting unemployment, the poor man! As incoming governor, when he announced his new policy of “forward guidance” in August 2013 tying future interest rate rises to the path of UK unemployment, this was bad talk. The imams disapproved.

You mean to say that neither Ben Bernanke, nor Janet Yellen after him, nor Draghi, nor any other central banker ever talked about fighting unemployment with near-zero interest rates in one and the same speech? Financial journalists of the UK glove puppet media are kidding, they all did!

Central bankers like Carney need props to defend near-zero or sub-zero interest rates and continued “largesse”. Keynesian pseudo-socialism is always handy, and the IMF which is the high priest and private club of central bankers, churns out slabs of this stuff. Carney heavily implied but certainly didn't say (after all, he is a central banker) that the BOE will “probably not” raise UK interest rates before early 2017. As if he had talked about the 22nd Century!

His proud Keynesian decision, in theory, should have raised a whoop and a holler from Britain's real estate operators and property sector. It should have seen them going for just a bit more on the price tag of Britain's wildly overpriced housing, garages, building land, offices, building services, building materials and anything else that fits into their 24/7 Ponzi realty scam.

Yet Carney’s guidance “failed to convince”. House prices in the UK stormed ahead at true grit double difit rates - but high-end bijou residences in major cities actually came off the boil, slipping as much as 1.5% in 3 months. What would Russian, Qatari and Saudi buyers do if the expected growth rate (the monthly growth rate) of resale prices turned negative? And if the British pound sterling actually wilted a little against whatever currency Russian, Qatari and Saudi real estate speculators used on their in-and-out buy and sell operation? That would be an outright disaster. It would be like the fall of Baghdad!

The BOE claimed in its defense that survey data showed business leaders “understood the (Carney) guidance was heavily caveated”. In other words just words. Probably grandstanding or a lie. Not serious, but in no way different from the bizarre lies that other bank governors put out.

Keynesian-flavored magic economics says that UK official unemployment has a 50% chance of falling below 7% by 2015, but possibly not before end-2015. In that case, the first rate hike would come in 2016, but otherwise not. Plausible denial is in any case always available. The nine members of the BOE’s Monetary Policy Committee might decide to issue a forecast – saying that quite simply none of them shared the forecast!  The same “plausible denial system” is operated by all other central bank governors and their policy committees. Talk the talk. Walk the walk.

Carney in the UK, like his confraternity of governors faces serious spin doctoring rivalry – from government forecasters. This is due to the state's own Data Doctors resenting the central bankster fraternity's imams.  Turf war struggles operate in this patch! The UK's state economic forecasters at this moment in time are making daily claims that the UK GDP growth rate “can or will” achieve 4% a year by late 2014. Some even spin the data and numbers “showing this has already happened”. Why not 6% GDP growth a year? It might be true! On Mars.

Keynesian Playtime Economics

We have “Surprising strength”. Mr Carney's real problem is that his enemies want a rate hike in the UK right away, and Carney is a central banker – so he doesn't want that. And what would happen if Carney didn't raise interest rates?  Would this damage the great economic conceit of our times - the New Keynesian notion that uber-powerful central bankers at the top of the Money Pyramid can twiddle knobs and dials and deliver whatever marvelous economic outcome they choose? We know the list.

Low unemployment, non-inflationary growth, declining budget deficits, house prices growing at a sensible 10% a year. And of course “paying down sovereign debt of the state”. Maybe from 2020.

Carney's main problem is that Keynesian economic anarchy means interest rates “can never rise”. They have to stay low (or even negative – if you have savings). Forever. Fiddling with the expected date of a symbolic hike in interest rates “by a whopping 0.25% per year” was the real fault of Carney.  Rob Wood, chief U.K. economist of Berenberg Bank put on a somber tone and noted: “changing the guidance on the date of the first hike by more than two years in nine months makes any central bank statements about future rate hikes close to worthless”. Another banker said: “The credibility of the BOE’s forecasts which have never been high, are now shot to pieces”.

The really great conceit of central bankers is pretending their “guidance” has any effect on the so-called real economy. Or interest rates, for that matter. Ask Barclays Bank (and its friends) about LIBOR.

The Keynesian Fix means the economy is “self regulating”, it runs itself – as long as bad banks are bailed out, savings are punished, and equity market grow forever - with interest rates always near-zero.

Even better, and we mean more laughable, Carney (like the others) uses the excuse that  “he has no real idea what is going on in the UK economy”. It is a black box. He can only work on “signals it sends”. Like the flight recorders of Malaysian Airlines flight 370. Rather faint signals, that is. Carney is ultra Keynesian. Thursday 12 June’s big announcement was the BOE will set loan-to-income and loan-to-value caps on mortgage lending by British banks.

This was peddled to public opinion as taking stern sensible anti-speculation moves to protect the UK real estate sector, but the real goal is to seal in concrete an annual 10% rise in house prices “forever”. To be sure this will not be 9.5% or 10.5% but exactly ten percent a year! You know it makes sense.

Carney asked for these new powers. His own tortured reasoning – central bank orthodox thinking – was that if UK house price rises could be fixed at 10% a year, forever, interest rates can stay low, forever. Even better, we mean worse, the reasoning continues that if interest rates rise, house prices will “sooner or later” also rise. Not fall. Supposed reasons would include a form of hedging by house owners refusing to sell into a falling market. If it doesn't seem logical ask your local imam.

Possibly the real fault of Carney was that after nine months as BOE Governor he goes on pretending that despite the “black box economy”, his central bank can benignly micro-manage “the complex advanced industrial economy”. In other words Soviet-flavored central planning and we all know what happened to the Soviet Union: it dissolved itself in a big puddle of debt. To be sure, Carney is a dangerous man like the other banksters, but claiming he is more in-credible than them is incredible!

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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