Monday, June 24, 2013

Monetary Policy (Still) @Full Retard

It only took four years, but finally the Bank for International Settlements (BIS) came out swinging against Bernankenstein and other global central banks. This is just one more sign that there has been a sea change in thinking towards this idea of subsidizing borrowing in order to solve a debt problem aka. Monetary Policy:
"The "borrowed time" central banks have created with ultra-low interest rates following the collapse of Lehman Brothers in 2008 has not been well used". 
You don't say...

The BIS said that Central Bank loose money policies are "retarding" policy reforms and are a "recipe for failure". In addition, the global central bank stated the obvious that the underlying global economic issues are not monetary-based and therefore all this additional monetary easing has done is provide 'borrowed' time and additional incentive to spend instead of save and otherwise maintain the status quo. This of course is what many of us have been saying for four years straight, that monetary policy created a moral hazard to ignore the underlying root cause issues and allow imbalances to accumulate further.

It seems very disingenuous to say the least that the BIS would come out at this late stage to deride a lethal policy that has been going on for four years straight. In their own terminology, they say that this policy is becoming "increasingly perilous". No shit. Thanks for sharing. You mean lending upwards of $9 trillion to leveraged speculators at 0% interest after the worst financial crash in history, was a bad idea? Who knew?

Again, this is all part of a broader sea change in attitude towards monetary policy and Central Bank policy in general. The past several weeks have seen massive gyrations in Japanese bond and stock markets as the wheels started to come off of Japan's "Abenomics" massive monetization program. The Nikkei yet again is one of the only markets in history to switch from full blown bull market to full blown bear market (-20%) in the span of just one week. Lately the People's Bank of China (PBOC) has been issuing warnings about a liquidity lockup in China's lending markets. That revelation caused the Shanghai Composite to drop 5% last night. Meanwhile, here in the U.S., last week, as I mentioned previously, President Obama abruptly indicated that Bernankenstein's term would end this year i.e. he "fired him on the spot" according to former Fed Governor Larry Meyer. And then John Boehner piled on by blaming misguided Fed policy for levitating the stock market as a proxy for fixing the U.S. economy.

The Idiocracy In a Nutshell
It's mind boggling that it took four years and massive dislocations in world markets for these collective dumbfucks to finally realize that you can't solve a debt problem by lowering the cost of borrowing. In addition, they are just waking up to the fact that the past four years since the collapse of Lehman Brothers in 2008, "has not been well used", because monetary policy levitated the markets and thereby gave corrupt policy-makers an excuse to do nothing. Worse yet, it subsidized all new forms of greed and malfeasance on Wall Street while the buffoons in leadership once again, looked the other way. Monetary policy could never be part of the solution when it was always a major driver of the underlying problem.

As always, my default assumption is that as usual they are waking up to this commonsense reality a day late and soon to be many dollars short.