The Central Banks are Irrelevant
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The MSM is finally picking up on something that TAE and other insightful analysts have been harping on for years now – the central banks of the world,
[See the full post at: The Central Banks are Irrelevant]Would rather hear what they have to say, and watch their actions when they are looking square in the face of a dozen TBTF’S collapsing, a depositors run on the banks, and a collapsing stock market for back ground music. Some of these CB dullards might actually think we are in the beginning stages of a grand economic recovery. Have a strong feeling most tunes will change considerably when they are staring down the big black hole.
Also add the BOE into the list of irrelevant central banks (see full article posted in the daily links at the bottom of front page)
Concerns about QE in its current form are growing, though. A number of economists have questioned the effectiveness of conducting further gilt purchases, and at least two members of the Bank’s rate-setting Monetary Policy Committee (MPC) have urged the Governor to consider buying other assets.
Last year, the Bank itself indicated that it was becoming difficult to conduct QE without distorting the gilts market.
From a market perspective, they are irrelevant or are rapidly becoming so. From the perspective of the real world, they are very relevant, because their policies are leading to inflation where it hurts most – food and energy prices. of course there are other factors, but I think we too readily discount the effects of easy money, and few people make the connection, preferring instead to lambast the other side over ‘not enough drilling’, or ‘too much consumption’. Central banks get a pass on their role.
ex VRWC post=2132 wrote: Central banks get a pass on their role.
Which is because neo-classical economic theory states that banks don’t exist / have no effect if I’m not mistaken…?
This article is nonsense. The Central bank’s power to print money is unlimited. Infinite. Infinity always wins over countervailing forces that are finite. There is nothing to stop the Fed from buying up the entire remainder of Fannie and Freddie bonds. When they do QE4, they will buy mortgages, and this will goose the stock market even more. They can buy non-agency mortgage bonds after they have bought all agency debt. They can even buy stocks directly. The Fed will stop at nothing to prop up the stock market, because the whole house of cards is totally dependent on the stock market. The solvency of virtually all pensions, insurance companies, and banks depends on the stock market staying up. If stocks collapse, everything goes down with them, and the Fed knows this.
The Central Bank’s (Fed’s) power is not unlimited. The price of a barrel of West Texas Intermediate crude will say when it’s over. It will be less than $147 per barrel.
AndrewP post=2139 wrote: This article is nonsense. The Central bank’s power to print money is unlimited. Infinite. Infinity always wins over countervailing forces that are finite. There is nothing to stop the Fed from buying up the entire remainder of Fannie and Freddie bonds. When they do QE4, they will buy mortgages, and this will goose the stock market even more. They can buy non-agency mortgage bonds after they have bought all agency debt. They can even buy stocks directly. The Fed will stop at nothing to prop up the stock market, because the whole house of cards is totally dependent on the stock market. The solvency of virtually all pensions, insurance companies, and banks depends on the stock market staying up. If stocks collapse, everything goes down with them, and the Fed knows this.
Andrew, it is critical to understand the game being played in order to make reasonable prediction about what actors in the game will do.
Let’s lay down some data to analyze:
1. The Federal Reserve is controlled by private mega banking interests, NOT the government.
https://www.youtube.com/watch?v=3QkmLnNEvdU
People like Jamie Dimon and Lloyd Blankfein sit on the Board of Directors of the Federal Reserve – and they won’t choose anyone for the head spot who will back stab their interests (basic Econ 101 self interest at play here).
2. The people who control the mega banks also control trillions in cash and debt via their various corporate fronts.
3. The mega banks, controlled by the very people who determine Federal Reserve policy going forward, are now making 30 year loans at about 4%.
Now, I know the Federal Reserve claims it works for the American people. Consider that an IQ test if you are informed… They lie. They don’t represent you. They are a banking oligarch predator Trojan Horse and you and I and the rest of America are the prey.
Would you lend 30 year money at 4% ahead of a hyperinflation? Why or why not?
Why would the people with the most to lose (who own the majority of the debt and debt receipt money) by hyperinflation operate a hyperinflation policy?
Why would they bail out debtors and zero out much of their own wealth after criminally enslaving everyone to debt in the first place?
This is standard economic analysis stuff here.
The logic that makes the most sense, given all the data, is that the insiders will convert their hoards of cash to real assets before hyperinflating.
That’s actually the stance of the folks here at TAE – that the system ultimately ends in hyperinflation, but AFTER a deflationary, societal asset stripping bust of epic proportions. One needs to survive the bust before they can even think about surviving the hyperinflation.
If they are going to create this depressionary bust to asset strip society before a hyperinflation, they would be best served by deceiving the prey that hyperinflation was imminent before pulling the plug. That way, they can sell out of the speculative bubbles created by hyperinflation fears at top dollar and maximize the cash they can use to buy everything up after they bust society.
Now, the arguments against this seem to come in two forms.
1. Bernanke is an intellectual idiot and all he knows how to do is print. All I can say is, believing a known liar and criminal at his word and ignoring economic incentives is a fool’s game. If Bernanke truly were an idiot, the banksters who put him in his position wouldn’t win at every opportunity, would they? Society wouldn’t be r*ped at every opportunity, would they? He’s a criminal front man, but he will never tell you this, so he plays the moron as he loots your family and community for all they are worth. Don’t expect people to catch on even after they are homeless and hungry. Many Chinese look fondly on Mao – and he murdered 60-80 million of them.
2. The government/mega banking duopoly is scared of America and will bail them out. They’ve abused us and looted us for 100 years, so I think they are pretty confident we aren’t smart enough to be able to resist their game plan even when people are told, point blank, exactly how it work out and why. People will attack each other when the Shock Doctrine is implemented. I have come to believe that the Architects of this system rather enjoy seeing the blood shed. Again, a fool’s bet, IMHO.
Corzine was really scared of America when he robbed $1.6 billion and lied under oath. JP Morgan was really scared when they ran Madoff’s Ponzi scheme and bribed Jefferson County AND KEPT THE LOOT.
Wachovia is really scared of the American people as they laundered $10-$378 billion in drug money… and their owners lobby to throw Americans into prison for using their product.
The government is really scared of Americans as they strip search our grandmothers and fondle our children right in front of our faces… knowing full well that al Qaeda’s leading operative dined at the Pentagon shortly after 911.
Like Fox News, the duopoly (Big Finance Capital perched up their captured government), they think Americans are sheep who will never figure out, en masse, the strategy being employed to criminally rob and enslave humanity…
As far as I can tell, they’ve made a very good bet.
But I don’t care about odds. I do the right thing, not because I think winning is certain or even likely, but because it is the right thing to do.
That is a concept that not very many people can grasp in the age of the narcissist.
The truth of the 4% mortgage is that the mega banks are literally DARING people to take on mortgages with the idea they will eventually bust out in the deflationary societal asset stripping bust for the ages and the banks will get the home and the money, too.
They’ll probably buy insurance and tax the homeless so they can get paid out.
Hi All,
Bernanke isn’t “trying to save the system at all costs.”
That’s a false paradigm according to the evidence and my analysis.
Every significant bubble ends in a significant bust. When you create the bubble, you KNOW the bust will follow.
When you throw the ball in the air, you KNOW it will come back down.
Bernanke isn’t an idiot, he just plays one for the people who haven’t figured out they are being robbed and Bernanke is simply the front man and fall guy for the criminals robbing and enslaving society.
Hyperinflation is very bad for the richest people on the planet who control the Federal Reserve through their ownership and control of the mega banks.
They own trillions in debt and trillions in cash.
People who think they are going to allow Bernanke to zero their wealth out and hand out homes to their enslaved debtors for the price of loaves of bread are simply do not understand the dynamics at play and the economic incentives at work.
Let me be clear. The people behind the Federal Reserve WANT TO ORCHESTRATE A BUST BECAUSE THAT’S HOW THEY TAKE POSSESSION OF THEIR SUBJECTS’ HOMES, BUSINESSES, LAND, ASSETS, VEHICLES, FARMS, ROADS, ENERGY COMPANIES, WATER COMPANIES, RAIN WATER, ETC…
Then, once they own almost everything, they will hyperinflate as it benefits them to “balance their books.”
The Debt Dollar Tyranny will have worked its “magic” and transformed the wealth of the people into the wealth of our authoritarian neo-feudal lords.
It’s soooooooo basic.
But a debt saturated society appears to be nearly incapable of accepting the obvious… perhaps because it is so painful to consider.
Duh – THAT’S EXACTLY WHY IT IS GONNA HAPPEN. Feudal lords don’t go through pain, serfs do.
Oh, an over population is their stated #1 concern… so if people right in a bust and kill each other off, that’s “double plus good!” from their standpoint.
AndrewP post=2139 wrote: This article is nonsense. The Central bank’s power to print money is unlimited. Infinite. Infinity always wins over countervailing forces that are finite.
Da Fed’s power is not Infinite, because the world is not Infinite. Da Fed can print FRNs, but it cannot Print Oil. The Dollar serves as a Proxy for Oil, so printing more FRNs just drives down the value of the Dollar against the Oil, making it less affordable and thus generating still more Demand Destruction and Bankruptcies of companies that utilize Oil to produce and deliver goods and services, which is about all of them.
If Da Fed prints to buy up Trash for Cash, the money flows into speculation in Oil which prices just about everybody out of the market, thus destroying the Oil Economy. The collapse just happens a little slower is all. Da Fed is not All Powerful, they run up against the Law of Nature that you cannot Make Something from Nothing.
Oil, Industrialization and the Dollar are all virtually synonymous and have been so since the days of John D. Rockefeller. Da Fed is just the step-child of the Rockefeller and Rothschild domination of the currency markets since the Age of Oil began, and actually going back further than that to the Age of Coal as well. The platform is wholly dependent on cheap EROEI Oil available to waste, and when it no longer is so available, this model collapses. Da Fed cannot do anything about that at all, just slow it down some until a Tipping Point is reached, at which point said collapse will come very fast and very hard.
The only real question which is valid these days is the Timeline for this, how long before the Political system breaks down, because that is going to come before the Economic system crashes. A decade maybe? Hasrd to say here but its not going to get any better as we move along here, regardless of the actions of Da Fed. The system is Toast and they know it.
travelling_without_moving post=2136 wrote: [quote=ex VRWC post=2132]Central banks get a pass on their role.
Which is because neo-classical economic theory states that banks don’t exist / have no effect if I’m not mistaken…?
The main deflection of the “establishment” economic theory is that debt doesn’t matter because it always balances out with the economy as a whole.Which is true, but very disingenuous.
That’s like saying that a family of 5 eating Thanksgiving dinner is equivalent to Jeffrey Dahmer and 4 drugged out teens simply because both groups have 5 people in them.
OK, I did that for shock value – but there is truth there.
The reason they make this argument is because Debt Dollar Tyranny is ENGINEERED to take monetary wealth from society and concentrate it into the hands of the insider oligarchs (Dahmer), hence leaving society as whole in a paralyzed state of debt servitude (drugged out teens).
If they focused on debt… this systematic transfer of wealth might become obvious to some.
Note in this chart that debts and assets always balance out ont he whole, but that society is never able to pay off their debts to Big Finance Capital due to their Debt Dollar Tyranny Trojan Horse monetary system.
https://www.keepandshare.com/doc/3325954/debt-dollar-tyranny-2-54k?tr=77
While the Dahmer minions keep hyping how great it is to have 5 people in the room like that Thanksgiving dinner family, Dahmer is sharpening his knife and getting ready to eat us.
Regarding the idea that one just “lose confidence in the dollar.”
That’s not true for people with dollar denominated debt.
If you think you can just lose confidence in your debts, you will have another thing coming.
Remember, a dollar isn’t a dollar… it is an interest bearing debt receipt… You have to pay up – AND YOU HAVE TO DO SO IN DOLLARS.
The debt holders aren’t going to bail out the entirety of society.
NOT.
GONNA.
HAPPEN.
“When Money is Debt; Wealth is Poverty” explains the mechanics of Debt Dollar Tyranny.
@ Andrew P Bulls eye Andrew, it is obvious that the rally is them in the S&P futures pit already. Great post except for calling the article nonsense. I called one of Ashvin’s posts by the same name a while back, while exposing similar views, and realized it was a big mistake. Getting back to Helicopter Ben, we ain’t seen nothing yet if this guy gets spooked by the economic outlook.
I would like to know what happened to the USD during the depression of the 1930 and how did banks like jp morgans and goldman and sachs didn’t go bankrupt.
The Tri-“They own trillions in debt and trillions in cash.”
They also own a quadrillion in OTC derivatives. What do they care which way it goes? They already own the whole shebang. And even if the masses get their homes for the price of a loaf of bread, in the coming hyperinflation, they will lose them in property taxes and other taxes and fees levied by the elite and their minions.
They will NOT allow a deflationary bust, in my view. So what if inflation destroys their (and everybody else’s money). Unlike everybody else, they can just create much more for themselves out of thin air. If a deflationary bust was the preferred outcome, it would have happened in 2009.
One of the key factors in markets is bond trading. It is key to this article and many others on AE. For those of us who are less savvy on macroeconomic basics, can Ash or others recommend some articles that outline the role bonds have traditionally played and how bond markets are currently working or being skewed, perhaps something written for a general educated reader?
AndrewP post=2139 wrote: This article is nonsense. The Central bank’s power to print money is unlimited. Infinite. Infinity always wins over countervailing forces that are finite. There is nothing to stop the Fed from buying up the entire remainder of Fannie and Freddie bonds. When they do QE4, they will buy mortgages, and this will goose the stock market even more. They can buy non-agency mortgage bonds after they have bought all agency debt. They can even buy stocks directly. The Fed will stop at nothing to prop up the stock market, because the whole house of cards is totally dependent on the stock market. The solvency of virtually all pensions, insurance companies, and banks depends on the stock market staying up. If stocks collapse, everything goes down with them, and the Fed knows this.
Hey Andrew,
I have to take issue with your focus on the stock market. You fail to notice how the conversation about the financial crisis is not about the value of stocks. It’s about the value of debt. Big difference.I used to think, wrongly, that the stock market was where the economy went down. For example, when investors buy shares of a company they own a part of the company. Right? Overall the stock market represents the perceived value of the market because it represents the perceived value of the bulk of companies making things and serving people in the economy. Right? Well partly right. The key word is ‘perceived’. When the MSM nightly news shows us that the stock market arrow went up, or down at the end of the business day, we the people are expected to have an appropriately happy or sad Pavlovian response. This is the expected limit of our perception.
There are two factors that make up the value of a stock. Price of the stock is one. Volume of stocks traded is the other. It is completely possible with computer technology to raise the price of a stock without a large volume of trades. As has been pointed out on this site many times, two parties trading a small volume of stock back’n’forth, like hot potato, at increasing prices can raise the price the stock. The stock market IS perceived value.
However the bond market is 10 times the size of the stock market. When a company, government or financial institution issues a bond. They issue debt. When someone buys that debt they own the company in a more real way than someone who buys stocks. Let me repeat, the bond market is 10 TIMES the size of the stock market. This is where the real deals get made. Pension funds, banks, insurance companies all focus on debt more than stocks. The stock market is for pure gambling. Banks don’t gamble. They are the house.
The Tri-“Remember, a dollar isn’t a dollar… it is an interest bearing debt receipt… You have to pay up – AND YOU HAVE TO DO SO IN DOLLARS.”
Wrong. Why do you think Japan is so bad off. They watched, helplessly, as the Yen strengthened from 300 per dollar to 100 per dollar during the late 80’s and early 90’s. The USA inflated away 2/3 of our debt to Japan.
We’re gonna do the same to China, and Saudi Arabia, and every other moron holding dollars.
You deflationists need to do a little simple addition and subtraction. The federal government owes $15 trillion, plus unfunded liabilities of over $60 trillion. that OVER $75 trillion that WILL be printed. AND they are running up way over $1 trillion in new debt every year. Actually, about 5 trillion every year, using GAAP accounting.
Or, they could just fold up shop and start over with a new currency. Either way, the dollar goes to zero pretty fast.
@ pipefit New currency probably a much easier way and a lot quicker. Could pull an over the weekend game blaming counterfeiters and drug money laundering as the reason. The sheeple would buy it and probably wouldn’t even care as long as their plastic cards still worked everywhere. They think paper and plastic are money anyway.
I thought if we knew how the dollar behaved during the last depresion thant that would mean the same trend might happen again and we can get help from that.
https://www.youtube.com/watch?v=1BdpL_EATyc&list=UUpwvZwUam-URkxB7g4USKpg&index=6&feature=plcp
Why is Max Keiser always pushing gold and silver.
We believe that it will drop significantly and could he be right.Neither the Fed nor any other central bank ‘prints money’. They simply don’t it’s impossible.
Central banks make loans/offer credit. In our debt-money system the central banks accept government collateral in exchange for loans that are turned into currency by the government. The government — any government — can ‘print money’.
If they were smart governments would ‘print money’ and retire some of this monstrous debt. “Inflation!” cry the gold bugs. Not so, any currency directed toward debt retirement would be extinguished along with the debt.
“Repudiation” cries the banker! How true: yet the creation of currency to retire debt is no different from the creation of debts in the first place. Both creations emerge from ledger entries: printed money to retire printed debts. See ‘Abraham Lincoln’ and ‘greenbacks’.
Central banks are collateral constrained. Central banks cannot be central banks and offer unsecured credit: the whole point of central banking is the validation of collateral when necessary (during bank runs and money-panics).
Central banks can lend against defective collateral but cannot lend against no collateral at all.
Inflation is the increase in the supply of money: commercial banks and finance increase the money supply by lending into existence what credit is needed to line the pockets of ‘entrepreneurs’ (thieves) and ‘innovators’ (racketeers).
Private interests can issue private currencies (within limitations) and during the US ‘free banking’ era did so. Collateral for these private currencies (bank notes) was gold and silver specie or government debt instruments. What banks offer today is debt. The purchasing power of debt in markets is same as currency: the cost to the system is much higher.
In debt money systems there are two theories regarding the management of the money supply: by strictly controlling the quantity of money in the economy (Monetarism) or by controlling the rate at which money is made available relative to some ‘natural rate’ (Taylor Rule Adjustments). The former approach does not work b/c the quantity of money within the economy at any given time is ‘undetermined’. The latter fails because there is little demand for funds at any rate because there is little system returns on investments (ROI).
The cost of money in the US is determined by the actions of millions of motorists who trade every day US dollars for a valuable physical good on demand. Because the dollar’s worth is determined by the petroleum trade the US Fed is largely irrelevant.
The Fed cannot ’cause inflation’ because it cannot unilaterally expand the money supply. The Fed’s (or others’) balance sheets expand because other, private ‘sheets’ contract. What the Fed can provide is moral hazard with its limitations. The outcome of moral hazard is to encourage private lending (speculation in assets with private credit).
Hyperinflation/hyperdeflation are both the arbitrage between two currencies in competitive circulation: one sells the currency he or she holds at any price to gain the currency one needs.
What is measured by the process is increased/diminished worth of seigniorage.
Jack, “I thought if we knew how the dollar behaved during the last depresion thant that would mean the same trend might happen again …..”
In the middle of the last depression, gold was officially revalued upward against the dollar from $20/oz to $35/oz in 1934, a 75% increase. Or looking at it from the vantage point of bagholders, er I mean dollar holders, each dollar went from buying 1/20 of an ounce of gold to 1/35 of an ounce, a 43% reduction in buying power, with respect to gold.
Obviously, you can see a similar loss in buying power in this modern day depression, just spread out over a longer time period.
And, after Big Brother FDR hosed all the sheeple and took their gold for his own stash, he declared it illegal to own and declared his paper to be the true and only legal money. The sheeple and even the sheep herders believe it to this day; even though the gold ascended from 20 to about 2000 and the printable legal money went the other way in value by roughly the same amount. The wise central bankers of the world also sold off much of their worthless gold for the new legal paper money now that it was no longer as good as gold. They even made it their reserve asset it was so wonderful.
pipefit post=2155 wrote: They also own a quadrillion in OTC derivatives. What do they care which way it goes? They already own the whole shebang. And even if the masses get their homes for the price of a loaf of bread, in the coming hyperinflation, they will lose them in property taxes and other taxes and fees levied by the elite and their minions.
They will NOT allow a deflationary bust, in my view. So what if inflation destroys their (and everybody else’s money). Unlike everybody else, they can just create much more for themselves out of thin air. If a deflationary bust was the preferred outcome, it would have happened in 2009.
pipefit, they don’t own the “whole shebang.” They don’t own your home, do they? They want it – and they know how to maximize their chances of getting it.
The phases appear to fit the following format:
1. Inflate to saturate society with debt.
2. When the initial bubble busts, change laws to allow insolvent corporate fronts to lie and claim solvency.
3. Fool the people into handing trillions in cash over to their corporate fronts via QE and the narrative of “jump starting the economy.” No, they are just maximizing the money they receive and the debt they will use to bury society. This is the operation over the last few years and they’ve benefited to the tune of trillions upon trillions of dollars. Why throw away trillions of dollars? They didn’t – nor would a rational actor expect them to.
4. Once the bailout looting of America is complete, and those trillions are sitting waiting to buy up a bankrupted America and the world… then they pull the plug and bust as many people as possible. This will likely be a slow kill process and, in some ways, it is already under way. They are multi-tasking.
5. Buy up America and the world with their fraudulent monetary system.
6. When they have control of the maximum amount of resources, then they will hyperinflate in order to “balance their books” and call it “even.”
7. They might have to use their puppet government to nullify the derivatives once they’ve accomplished their goal – annihilating the various nation state economies so that the private international banking cartel can roll up the nation’s assets when they take the various states into receivership. You know, private monopoly ownership of rain water, utilities, roads (public tax payer built toll roads are starting in Greece!), etc.Tails they win, heads society loses.
Idiots hurt themselves. Machiavellian criminals rob you blind while convincing you they aren’t robbing you so you don’t get mad and accept being looted.
Look, I wish it weren’t so – it is really horrible once you wrap your mind around the evil.
But that’s the plan that makes economic sense.
Hyperinflation right away makes no economic sense given the facts of the case.
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