While the raiments of the empresses and emperors of central banking are still being fawned over by their courtiers in government and the press, there’s a growing number of observers, their eyes wide open, who are proclaiming the truth: the central bankers are naked! From Karl Denninger, on a guest post from theburningplatform.com:
I read this twice before realizing the last name of the author perfectly fit the so-called “fix” for 2008 — and the premise that “they could do that again.”
By the end of the week, stocks, currencies and commodity prices weren’t crashing any longer but financial markets were far from settled. Over the past 10 days, markets have plummeted, paused, recovered and fallen again. There’s little sign the anxiety is lifting.
Until recently investors had been preoccupied with the weakness of the post-2008 recovery. Now some are asking whether 2008 might come round again. It’s an especially disturbing possibility because, on the face of it, the policy options for responding to another slump are fewer than last time. Governments have run big budget deficits to support demand, so there’s less so-called fiscal space for a new round of stimulus, or so the thinking goes. Interest rates are still at zero, and even the advocates of quantitative easing recognize that it ran into diminishing returns. What’s left?
Clive goes on to raise the old flag once again; that the “effective remedies” could once again be trotted out.
There’s a problem with this premise: They didn’t work the last time.
My evidence? All of those measures are still in place!
If they were effective then they could have been withdrawn. They were not, any more than opiates are effective at resolving the source of pain. Oh sure, opiates mask pain (at the cost of making you stoned out of your mind!) but they don’t fix whatever is causing the pain itself.
What’s worse, of course is that in order to maintain their effectiveness you must continually increase the dose of these monetary instruments exactly as tolerance does the same thing with opiates. In the case of opiates you eventually reach a “coffin corner” as there is a depressant effect on the body that has a hard upper limit; when you reach it the user’s respiration and heart stop, and that’s the end of the show. As the effective dose ratchets upward you eventually reach the point where either the user accidentally takes too much and dies, or worse reaches the point that the effective and lethal doses cross and he dies that way.
In the case of so-called “monetary stimulus” the facts are in at this point — the 2008 nostrums did not work. Yes, the stock market went back up. But here’s the rub — they “worked” by increasing the debt in the system, and since GDP is computed in units of currency you must back out of the GDP equation the additional units that were added.
If you do this you’ll find that from the time of the crisis to today GDP has in fact expanded by less than 1% a year. Since the population expands by about 1% a year in the United States (and has been for the last 50 years or so) this means that on a per-capita basis GDP has actually been negative the entire time.
Read that last paragraph however many times you need to until it sinks in: There has been no economic growth in real terms on a per-person basis since the economic crisis. Zip. Zero. Nada.
To continue reading: More Bone-Smoking Garbage
