Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Central Bankers, Fear and Other Bad Counselors

Politics / Central Banks Nov 22, 2014 - 11:02 AM GMT

By: Raul_I_Meijer

Politics

The original idea behind a central bank is that medium and longer term monetary policy should not be allowed to be held hostage by a short-term prevailing political wind, that an incumbent politician and his/her party should not be permitted and/or enabled to manipulate a nation’s currency for political gain. A central bank was (and still is officially) supposed to be independent of politics, to be a buffer between a society’s long term interests and a politician’s short-term ones.


In particular, no-one should issue huge amounts of money to make it look like they were just awesome leaders that make everyone rich, while sinking the future of a society in the process. I know, I know, there are tons of other ways to explain the drive to found central banks, just google Jekyll Island, but the issue of economic stability vs fleeting political flavors is certainly a big one.

So. Have we come a long way or what’s the story? Today’s central banks do nothing BUT engage in short term policies that keep incumbents as happy as they can be in bad economic circumstances. Central banks have become political instruments that pamper to the tastes of whoever may be in charge on any given day, which is the exact 180º opposite of why they exist in the first place.

And because they’ve gotten so far removed from what they’re supposed to be doing, central bankers start to realize they’ve ended up in completely unfamiliar and uncharted territory. And now they are, like anyone would be in that kind of position, scared. Sh*tless. And as we’ve all learned from kindergarten on that fear is a bad counselor. They may have risen to positions of oracles and household names (also entirely contrary to their original job descriptions), and they may have fallen for the flattery that comes with all that, but deep down they know full well they’re way out of their leagues.

The best they can come up with is trying to bluff their way out of their conundrums. Because it’s not as if they don’t understand that doing exactly what they were intended not to do, i.e. flood markets with cheap money not based on any underlying real values, or work performed, will of necessity at some point blow up in their faces. They just hope and pray it will take long enough for them to be somewhere else, enjoying a Banana Daiquiri when that mushroom appears on the horizon.

Central bankers have been reduced to political toys, and they – at least at times – realize that’s not a good position to be in. If only because it makes them redundant. If they only simply do what politicians want anyway, we might as well just let those politicians set monetary policy by themselves.

That puts central bankers in a situation in which they are being set up as patsies, to catch all the bad rap if and when things get even worse then they already are. And they will. Moreover, obviously it’s not the politicians that decide, but the people who finance their campaigns (they do need long term policies), and once you realize that, you really need to wonder what kind of court jesters Bernanke, Yellen, Draghi and Kuroda have become.

Now that we’ve come to naming names, look at them: Draghi today did another press-op in which he blubbered about what he’ll do about inflation, and fast. But there’s nothing blooper Mario can do to make people in Europe spend their money any faster, if only because they don’t have any money. And his banking overlords won’t let him hand out money to the people even if he would want to (dubious for a Goldmanman), so boosting that consumer spending is never ever going to work.

All Mario gets to do is spread the alarm, and then catch the fall. But you know, you’re thinking, doesn’t he know hat’s going on, and he may well know very well. In the end that’s just a sad story, and because of the role he plays he deserves to never again have a single night of solid sleep. His role is just too ambiguous. And most of all, it hurts too many innocent people.

The Fed has Janet Yellen, who’s trying to contortion her way into explaining that the US economy is doing so well she just must raise interest rates, which is so far off reality it’s not funny, but it’s the going story, because her paymasters on Wall Street need or want more profits, and they’ve gotten all they could out of the zero % policies now that every mom and pop is on the same side of the trade as they are.

All I can think when I see her pop up again is why would anyone, let alone Janey herself, want to be in her position? Where’s the satisfaction? Why not go live somewhere out on Martha’s Vineyard and let others do the damage? What drives these clowns?

The Bank of Japan’s Haruhiko Kuroda is perhaps the most overt and obvious political tool of them all, who does only what PM Shinzo Abe tells him to, and drives his country into a deep dark stinking swamp while he’s at it. Kuroda doesn’t even know how to spell ‘independent central banker’.

And talking about bad counselors, Bloomberg reports on a meeting Abe had with Paul Krugman, who won that Fake Nobel a few years back for the same single two words he undoubtedly told Abe: Spend and More. If any country today could benefit from having a truly independent central bank it’s Japan, But of course, the Bank of Japan is, if anything, even less independent than the rest of them.

What drives central bankers in November 2014 is fear, pure and simple, if not absolute screaming panic. Together, they’ve literally spent untold trillions of dollars, and what is the result? People everywhere across the planet slow down their spending more and more. And that means deflation. Which is what they’re all supposed to be so afraid of. But which they also all know cannot be averted.

And then this morning we see that the Chinese central bank People’s Bank of China, PBOC, has lowered its interest rate targets. The PBOC chairman’s name is Zhou Xiaochuan, and there’s of course plenty reason why nobody knows that name. That is, nobody even expects the PBOC to be independent from the rulers.

Which is somewhat curious, because the role Zhou plays is no different at all from that of Yellen, Draghi and Kuroda. The only difference is the pretense that the latter are not political toys and instruments and kow-towing fools.

Why does Zhou lower interest rates? Because he’s scared. Well, he and his forbidden city masters. China’s economy is falling so much so fast that they see the historically by far biggest ever debt-driven economic model implode on their watch. Xi and Li and Zhou fear the wave that’s coming for them, and given the size of the Chinese economy, no matter how fake and debt-based it is, we should all share their angst.

Japan is dead, a zombie with lipstick, and still the world’s no. 3 economy. One more reason for all of us to be afraid. Add in Draghi whose only resort is to find different ways of saying the same thing he will never ever be able to do, to buy everything in Europe that’s not bolted down and then buy the bolts too, and you have am entire world that should be scared straight out of their undies.

Which makes Janet Yellen’s task of defending the upcoming rate hikes all the more amusing. Yeah, sure, the US economy is doing great. Sure, grandma. Look, we all know your place in history will be that of someone who was either too complicit or too stupid while the walls were crumbling. And we all know today that you’re scared to even open your mail in the morning. Because we all know as well as you do that the picture of the US economy that you paint is a virtual reality. The only question is, do you yourself actually live in it?

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - 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 advisors.
Raul Ilargi Meijer Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in