Federal reserve

“Independent” Central Banks = Total B.S.

Headlines:

1. Monetizing Sovereign Debt = “Blows Up” Central Bank Independence Argument.

2. To The Contrary…Central Banks + Sovereigns = Partners In Monetary High Jinks.

Q2 hedge fund letters, conference, scoops etc

Federal reserve

skeeze / Pixabay


This Whole Idea That Central Banks Are Fire-Walled From Political Influences = Such A Crock Of S _ _ T.

That Fantastical Idea Was Flushed Down The Toilet With The Onset Of Quantitative Easing + ZIRP.

It Is So Obvious…Yet Frequently Denied By Both Central Bankers + Politicians…What A Joke!


It All Comes Down To This Very Basic Question…

Who Benefits The MOST From Quantitative Easing + ZIRP?

The Answer = Sovereign Governments…As Interest Costs On Their Debt Are…At The Very Least…Significantly Diminished And…At The Most…Virtually Eliminated.

And With This Very Elementary Fact…The CONFLICT = Established.

And It Is NOT Debate-able.

No Matter The Initial Intent Of Central Bank Policy [QE + ZIRP]…The Resulting Consequences…Have Landed The Global Economy In This Awkward State.


Awkward State…You Might Ask?

Isn’t All Well With The Global Capital Markets?

The Short Answer = Yes…For Now…But Requires A Simple Proviso.

All Would NOT Be Well…If Not For $35T+ In Money Production [by central banks] To Support Sovereign Debt Markets.

Without That $35T…Public Finance Markets Would Be Priced Woefully Lower And Sovereign Governments Would Be Drowning In Interest Payments On Their Substantial Debt.

So It Would Seem…Central Banks + Sovereigns = Immoral Partners In Their Own Scheme.

Their Rationale…However It Is Articulated = 100% Irrelevant.


At Least The Federal Reserve “Attempted” To “Normalize” Their Balance Sheet…But Naturally Failed…As They Could Only Manage To Trim Back 18% Of Their Aggregated Purchases Since 2009…Despite Much Rhetoric…Over A Decade…That “Normalization” Would Painlessly Proceed.

In Contrast…The Bank Of Japan And The ECB Never Even Had The “Sack” To Attempt Normalization…Serially Gorging On Their Region’s Sovereign Debt…And Other Securities Too i.e. Corporate Debt + Equity ETF’s.

The Bank Of China Elects To Increase Liquidity Through Other Measures i.e. Reserve Ratio Cuts + Flooding State Owned Banks With Yuan…Different Tactic But Same Basic Strategic Objective.


The Subsequent Global Capital Market Distortions Are Countless + Surreal.

i.e. Fiscally Irresponsible Greece + Italy + Spain Pay A Lower Rate Of Interest On Their Debt Than The United States Despite Lower Credit Ratings And Looser Fiscal Standards.

The Accepting + Penalized Sovereign Fool In This Scenario = Donny T’s United States Of America…

Essentially Powerless To Counteract Draghi’s ECB Policies…That Indirectly Punish The U.S. [despite it’s own fiscal woes]…For The Economic Sin Of Fiscally Towering Over The Fragile Financial Structures Of Puny + Irrelevant + ECB Subsidized Greece + Italy + Spain.


There Are So Many Other Capital Market Examples Like This…It Is Plain Laughable.

Currency Manipulation Comes To Mind…It Is Just As Bad…Or Even Worse…i.e. SNB’s Chairman Jordan Shamelessly Flaunts Its Manipulation Of The Swiss Franc…While The Bank Of Japan’s Kuroda Boldly + Obtusely Denies QE’s Impact On The Yen’s Value.

Even The Film “Mike And Dave Need Wedding Dates” Is Not This Comically Absurd…You Can’t Make This Stuff Up.


What Both Central Bankers + Politicians Will Likely NEVER Tell You = THE TRUTH.

Because THE TRUTH Is Too Painful For The World’s Delicate Bureaucratic + Elitist Snowflakes…Including Donny T…But I’ll Take A Stab At It.

The Bottom Line = As The Globe’s Population Growth Both Slows + Ages …Aggregate Demand Decreases…And As Aggregate Demand Decreases …Ceteris Paribus…Prices Head South…Including Capital Market Prices.

Thus…The $35T In Newly Minted Dollars, Euros, Yen + Yuan Are Intended To Substitute For The Demand Shortfall + Maintain/Increase Prices…Because A Trend Of Sustainably Decreased Prices [hence central bank inflation obsession] Disrupts The Capital Market Status Quo.

And A Disrupted Capital Market Status Quo Likely Leads To Disrupted Geo-Political Status Quo.

And A Disrupted Geo-Political Status Quo Threatens The Existing Sovereign Power Elite Position…And No Sovereign EVER Voluntarily Cedes Power.


Therefore…The Money Printing Solution Intends To Maintain The Capital Market Status Quo…But Is Exceptionally Desperate + Loaded With Risk …As It Softly Endorses The Concept That Capitalism Has A Soft White Under Belly…And Is Susceptible To Outright Death…Unless The Currency Printing Presses Run 24×7.

It’s The Wild West Of Economics…There Are No Rules…Other Than To Prevail…At ANY Cost…Where Poor Economic Behavior Is Rewarded…NOT Penalized…i.e. $13T+ Of Negative Yielding Sovereign Debt…A Central Bank Delivered Reward For Irresponsible Sovereign Economic Policy.


Ultimately Though…The Geo-Political Status Quo Will Shift…But Until Then…And It Could Be A While…So Many More Trillions Will Be Newly Minted.

The Last 10 Years Are…Ironically…Just The End Of The Beginning For A New Era Of Economic Policy =

Central Banks + Sovereign Governments In Cahoots To Maintain The Economic Mirage That Capitalism Is Bullet-Proof + Utopian.

Think About It…Global Economic Stability Is Almost Universally Dependent On Sovereign Debt Monetization Financed By The Limitless Central Bank Money Trees…Sanctioned By The Entrenched Political Power Structures.

Article by Global Slant


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