Tag Archives: central bankers

Technocrats Everywhere: Central Bankers as Political Saviors, by Robert Aro

Central bank band-aids are often mistaken for economic and financial cure-alls. From Robert Aro at mises.org:

The word “technocrat” is seldom used by the liberty crowd. It invokes the idea of a bureaucracy using technical experts to somehow make the right decisions on behalf of the entire nation and stands as the antithesis of a free society. Sadly, it captures the essence of central banking as well. This week, news came out of both Italy and Australia showcasing how this works. Starting with Italy, on Tuesday, the New York Times praised the technocrat when announcing that former head of the European Central Bank Mario Draghi was summoned to Italy in hopes of becoming the next prime minister. Described in the paper as the “pie-in-the-sky wish of many of Italy’s European Union-friendly politicians,” Draghi appears to be the man destined to guide the nation out of the current pandemic. As explained:

By officially bringing in Mr. Draghi as a potential leader in a critical moment, Italy seemed poised to return to the model of the technocratic government that has the reputation of bailing out the country when its political forces fail.

The press tells us politics has failed the country, but salvation can be found through electing a better, more skilled and experienced leader. In this case, it becomes the job of one of “Italy’s highest profile international officials,” who it said to have once steered Europe out of crisis almost a decade ago:

He is credited with easing interest rates and proclaiming in 2012 that he would do “whatever it takes” to save the euro as the Central Bank’s president during the eurozone debt crisis.

Continue reading→

The Fed Will Continue Tightening Until Everything Breaks, by Brandon Smith

That current central bank policy may be on track to destroy the economy is a feature not a bug of that policy. From Brandon Smith at alt-market.com:

Around three years ago, in September 2015, I wrote an article titled ‘The Real Reasons Why The Fed Will Hike Interest Rates‘ in which I predicted that the Federal Reserve, in the face of criticism, would soon pursue a program of interest rate hikes into economic weakness. I argued that this plan would be somewhat similar to what the Fed did in the early 1930’s; an action that prolonged the Great Depression for many more years. So far, my prediction has proven to be correct.

Despite the fact that the Fed keeps raising rates as it tightens the noose around the supposed economic “recovery”, there are still many people out there who refuse to accept that the central bank would deliberately implode the fiscal bubble that it has spent the last ten years inflating. Even today, I still see arguments proclaiming that the Fed will be forced to pull back if stocks fall beyond 15% to 20%. I also see claims that Fed officials like Jerome Powell had “better start looking for another job” because Donald Trump won’t be happy with Fed policies that could cause a crash. This is pure delusion from people who do not understand how the Fed operates.

First and foremost, let’s be clear, the Federal Reserve is an autonomous entity that does not answer to government oversight. It never has and it probably never will. This reality is supported by admissions by former Fed officials like Alan Greenspan, who publicly noted that the Fed answers to no one.

The central bank functions in quite the opposite capacity from what many people assume. As Carroll Quigley, prominent American historian and mentor to Bill Clinton, noted in his book Tragedy And Hope:

“The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank … sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”

In other words, governments do not assert control over central banks; central banks assert control over governments. That said, there are some exceptions to this rule. For example, an act of Congress can be used to enforce a full audit of Fed activities, something which has never been done.

Fed propaganda asserts the lie that the bank is audited annually by the Government Accounting Office (GAO), but this is NOT an audit of Fed financial actions and policy initiatives. Rather, it is an audit of minor expenditures. Knowing how many pencils and desks the Fed purchases in a year does not help us to understand the bank’s influence over our economic security. All other audits of the Fed are done internally by the Fed’s own Board of Governors. This is hardly transparent or independent.

The only time the public has gained access to even a partial government audit of Fed activities was during the audit of TARP. This alone exposed trillions of dollars in bailouts and overnight loans to various banks and corporations, many of which were foreign.

The GAO did nothing in terms of regulatory action against the Fed after it was revealed that they were funneling trillions in capital into foreign corporations. All they did was make a ledger of the transactions, and remained silent on the rest.

I remind readers of this history and the conditions surrounding Fed actions because I want to drive the point home that, for now, the Fed and other central banks dictate the rules of the game. Some may say this has changed with the election of Donald Trump, but I disagree. If anything, as long as Trump is in office, the Fed will chase higher interest rates and steeper balance sheet cuts. They will not stop until markets break. And, the only solution (shutting down the Fed entirely) also comes with a set of extreme fiscal consequences.

There is a wall of cognitive dissonance when some in the public are confronted with this notion. They prefer to believe in a set of standard lies rather than accept that the Fed is a saboteur of our financial system. Here are those lies, listed in no particular order…

Lie #1: The Fed Is Unaware Of The Bubbles it Creates

Mainstream economists and Fed officials alike use this lie regularly. Not once has the Board of Governors of the Fed ever been audited or punished in light of an economic crisis they created. When central bank culpability is obvious, they simply claim they had no idea the fiscal bubble was as inflated as it became. The disaster “surprised them”.

The Fed’s creation of easy credit and zero oversight, not to mention its opposition to any regulation of derivatives, fed the bubble prior to 2008. Then they ignored all obvious warning signs that the bubble was about to burst. But what about the current “everything bubble” that the Fed has created through near zero interest rates and endless fiat money manufacturing? Well, Fed officials openly admit to their involvement.

As the former head of the Federal Reserve Dallas branch Richard Fisher admitted in an interview with CNBC, since 2009, the U.S. central bank has made its business the manipulation of the stock market to the upside:

“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly.” [After the first Fed rate hike]

The Fed knows when it is conjuring a bubble environment; they just won’t admit it as the bubble is deflating and economic pain is everywhere.

Lie #2: The Fed Is Unaware That It’s Tightening Policies Cause Extreme Economic Contraction

So, if the Fed is aware when it causes a bubble, is it aware when it is popping a bubble? Absolutely. As Ben Bernanke admitted in a speech in 2002:

“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

Bernanke was referencing Milton Friedman’s assertion that the Fed’s tightening policies in the early 1930’s, after they had made markets dependent on easy credit through the 1920’s, had caused negative feedback in the system at the perfect time, destabilizing any possible recovery for years to come.

The problem is twofold, of course. The Fed was allowed to fuel a fraudulent market bubble in the first place. Then, it was allowed to pop the bubble in the most destructive way through tightening policies (like higher interest rates), which crushed Main Street support. If this sounds familiar, it is, because the same tactic is being used by the Fed today.

In an October 2012 meeting of the Federal Reserve, minutes indicate that Jerome Powell was highly vocal about what would happen if the Fed pulled support from debt addicted markets by raising interest rates and cutting assets:

“My third concern — and others have touched on it as well — is the problems of exiting from a near $4 trillion balance sheet. We’ve got a set of principles from June 2011 and have done some work since then, but it just seems to me that we seem to be way too confident that exit can be managed smoothly. Markets can be much more dynamic than we appear to think.

When you turn and say to the market, “I’ve got $1.2 trillion of these things,” it’s not just $20 billion a month — it’s the sight of the whole thing coming. And I think there is a pretty good chance that you could have quite a dynamic response in the market.

I think we are actually at a point of encouraging risk-taking, and that should give us pause.

Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.”

Jerome Powell is now the Fed Chairman, and yet, he is following through with the same tightening actions that he warned about in 2012. He is pretending that the tightening process will be painless even though fundamental economic conditions are just as weak now as they were six years ago. Again, Powell knows the Fed is going to cause a crash, but he is moving forward anyway and he is not warning the public about the danger.

Lie #3: The Fed Is The Center Of Establishment Power, Therefore They Need The U.S. Economy To Thrive

While it is true that the Fed is currently in charge of the dollar as the world reserve currency, the idea that the Fed is somehow indispensable to the global establishment has always bewildered me. Everything the Fed has done since its inception in 1913 has been designed to diminish the U.S. economy and erode the purchasing power of our currency. I ask, at what point has the Fed ever taken an action which did NOT result in a bubble or a bubble collapse? At what point has the U.S. economy ever improved at a fundamental level because of the Fed, rather than diminished in the wake of a fake recovery the Fed conned the public into believing in?

What else does the Fed do besides sabotage?

I believe the truth is that the Fed does not care about the U.S. economy, or even the survival of the dollar, as is obvious in their actions. The Fed is merely a puppet entity of larger institutions like the Bank for International Settlements or the International Monetary Fund. These institutions seek centralization at a global level, with a global currency system and global economic authority, as they have openly admitted to in their own publications. The U.S. economy as we know it today, and the Fed by extension, are expendable in this pursuit.

The Fed will continue on its current course no matter the cost, because there is a greater strategy in play. In fact, some elites may even welcome a shutdown of the Fed at this time because this opens the path for the death of the dollar as the world reserve currency and the introduction of a new world monetary system, while all the consequences surrounding the shift can be blamed on political chaos and coincidence.

To drive the point home, I leave readers with a revealing quote from Christine Lagarde, the head of the IMF, as she outlines why crisis in national economies is actually good for the IMF:

“When the world around the IMF goes downhill, we thrive. We become extremely active because we lend money, we earn interest and charges and all the rest of it, and the institution does well. When the world goes well and we’ve had years of growth, as was the case back in 2006 and 2007, the IMF doesn’t do so well both financially and otherwise.”

 

Draghi’s Membership in Murky G30 Financial Group Under Fire, by Don Quijones

There’s nothing questionable about this at all. From Don Quijones at wolfstreet.com:

A private club for central bankers, regulators, and bankers.

On Wednesday, ECB President Mario Draghi suffered the rare ignominy of being criticized in public by the EU’s Ombudsman, Emily O‘Reilly, whose job it is to arbitrate public complaints about EU institutions. The complaint against Draghi was that he had compromised his public role by regularly attending the Group of 30, a secretive club of corporate and central bankers.

In her response to the complaint, O‘Reilly recommended that Draghi should suspend his membership of the group for the remaining duration of his term.

“The implied closeness of the relationship through membership – particularly between a supervising bank and those it supervises – is not compatible with the independence obligation of an institution such as the ECB,” O’Reilly said.

Previously called the Consultative Group on International Economic and Monetary Affairs, the Group of 30 (or G30) is a Washington DC-based private group whose members consist of central bank governors, private sector bankers and academics. Membership is by invitation only.

Its current membership list reads like a Who’s Who of global finance. It includes current and former central bankers, many of whom now work or worked in the past for major financial corporations, such as:

  • Mario Draghi (ECB, Bank of Italy, Goldman Sachs)
  • Ben Bernanke (former Chairman of the Federal Reserve)
  • William Dudley (New York Fed, Goldman Sachs)
  • Timothy Geithner (Warburg Pincus, former US Treasury Secretary, New York Fed)
  • Mark Carney (Bank of England, Bank of Canada, Goldman Sachs)
  • Axel Weber (UBS, ECB, Bundesbank)
  • Haruhiko Kuroda (Bank of Japan)
  • Christian Noyer (Bank for International Settlements, Bank of France)
  • Jaime Caruana (Bank for International Settlements)
  • Agustín Carstens (Bank for International Settlements, former Chairman of Bank of Mexico)

To continue reading: Draghi’s Membership in Murky G30 Financial Group Under Fire

 

Deranged Central Bankers Blowing Up the World, by Jim Quinn

From Jim Quinn at theburningplatform.com:

It is now self-evident to any sentient being (excludes CNBC shills, Wall Street shyster economists, and Keynesian loving politicians) the mountainous level of unpayable global debt is about to crash down like an avalanche upon hundreds of millions of willfully ignorant citizens who trusted their politician leaders and the central bankers who created the debt out of thin air. McKinsey produced a report last year showing the world had added $57 trillion of debt between 2008 and the 2nd quarter of 2014, with global debt to GDP reaching 286%.

The global economy has only deteriorated since mid-2014, with politicians and central bankers accelerating the issuance of debt. These deranged psychopaths have added in excess of $70 trillion of debt in the last eight years, a 50% increase. With $142 trillion of global debt enough to collapse the global economy in 2008, only a lunatic would implement a “solution” that increased global debt to $212 trillion over the next seven years thinking that would solve a problem created by too much debt.
The truth is, these central bankers and captured politicians knew this massive issuance of more unpayable debt wouldn’t solve anything. Their goal was to keep the global economy afloat so their banker owners and corporate masters would not have to accept the consequences of their criminal actions and could keep their pillaging of global wealth going unabated.

The issuance of debt and easy money policies of the Fed and their foreign central banker co-conspirators functioned to drive equity prices to all-time highs in 2015, but the debt issuance and money printing needs to increase exponentially in order keep stock markets rising. Once the QE spigot was shut off markets have flattened and are now falling hard. You can sense the desperation among the financial elite. The desperation is borne out by the frantic reckless measures taken by central bankers and politicians since 2008.

• 637 rate cuts since Bear Stearns
• $12.3 trillion of asset purchases by global central banks in the past 8 years
• $8.3 trillion of global government debt currently yielding 0% or less
489 million people currently living in countries with official negative rates policies (i.e. Japan, Eurozone, Switzerland, Sweden, Denmark)
• -0.92%, the most negative yield in the world (2-year Swiss government bond)

Massive levels of debt and negative interest rates have done nothing to revive U.S., European or Asian economies. The natives are growing restless, as the early electoral success of political outsiders like Trump and Sanders substantiates. Far right parties in Europe are gaining traction as hordes of Muslim refugees overwhelm their countries. Central bankers, who formerly graced the covers of Time Magazine as saviors and heroes, are now being revealed as nothing more than glorified money printers with PhDs and no plan B.

To continue reading: Deranged Central Bankers Blowing Up the World

 

This Market Is a “Wheelbarrow of Dynamite” Waiting to Blow, by Bill Bonner

From Bill Bonner, Chairman, Bonner & Partners, via wolfstreet.com:

DELRAY BEACH, Florida – It’s hot in Florida. Steamy hot. Hair curls and bodies go limp.

The “relief rally” continued yesterday. All over the world, stocks gained. So did oil and commodities. (More on that below in today’s Market Insight.) The Dow was up 369 points – a 2.3% move. Chinese stocks were up by about 5%. Why?

U.S. GDP numbers for the second quarter came out higher than expected. The economy grew by an annual rate of 3.7%. And influential New York Fed chief William Dudley said the argument for a rate increase in September was “less compelling.”

A Decline in Excess of 50%

Oh, ye of little faith… fear not! Things are happening just as they should. It is the end of summer. Markets are giving strong hints of things to come in the fall. Like Vesuvius, a plume of smoke rises… and a cloud of dust hangs over the markets. The economic earth rumbles… and animals take flight.

But in come the cronies to tell us not to worry about it.

And who knows what happens next?

Your editor is a fairly good plumber. He can put the pipes together and unclog the toilet. Alas, his record as a market soothsayer is spotty. He is rarely wrong, but often so early that by the time the event occurs even he has forgotten he ever predicted it.

But today we are encouraged and emboldened. We swagger ahead, like a reedy poet into a rough bar, confident in the knowledge that there are giants behind us. Yes, economist and money manager John Hussman’s forecast is similar to our own. From his most recent note for Hussman Fund clients:

If you roll a wheelbarrow of dynamite into a crowd of fire jugglers, there’s not much chance things will end well. The cause of the inevitable wreckage is not the dynamite, but the trigger is the guy who drops his torch.

Likewise, once extreme valuations are established as a result of yield-seeking speculation that is enabled (1997-2000), encouraged (2004-2007), or actively promoted (2010-2014) by the Federal Reserve, an eventual collapse is inevitable.

By starving investors of safe return, activist Fed policy has promoted repeated valuation bubbles, and inevitable collapses, in risky assets.

On the basis of valuation measures having the strongest correlation with actual subsequent market returns, we fully expect the S&P 500 to decline by 40% to 55% over the completion of the current market cycle. The only uncertainty has been the triggers.

A $12 Trillion Wealth Wipeout

A “decline in excess of 50%” within “less than three years” is our forecast.

To continue reading: This Market Is a “Wheelbarrow of Dynamite”

She Said That? 10/18/14

From Chair of the Board of Governors of the Federal Reserve System Janet Yellen:

Some degree of inequality in income and wealth, of course, would occur even with completely equal opportunity because variations in effort, skill, and luck will produce variations in outcomes. Indeed, some variation in outcomes arguably contributes to economic growth because it creates incentives to work hard, get an education, save, invest, and undertake risk.

Conference on Economic Opportunity and Inequality, Federal Reserve Bank of Boston, Boston, Massachusetts, 10/17/14.

Under laissez faire capitalism, there is no “arguably” about it: the prospect of getting rich, keeping one’s wealth, and keeping it in a store of stable monetary value propels economic growth, far more so than any other system. On the other hand, making central bankers the commissars of our overtaxed, over regulated, welfare-state economy destroys incentives to work hard, plunges college graduates into debt for degrees of little economic value, drives interest rates so low that nobody saves, turns investment markets into casinos, and makes speculation and financial engineering the predominant forms of risk undertaking. Ms. Yellen specified four sources of opportunity: resources available for children, affordable higher education, business ownership, and inheritances, but omitted what is arguably the most important source of opportunity in our state-directed economy: cronies in government. Three nuggets of advice for Ms. Yellen and all the other Washington masters and mistresses of the universe: shut up, get out of our way, and leave us alone.

Fed Cries Uncle

Well, that didn’t take long. From it’s closing high on 9/18/14 of 2011.36 to today’s intraday low of 1835.02, the S&P index declined by less than 9 percent, which does not even qualify as an official “correction” of 10 percent. However, the “Got-Your-Back” Federal Reserve doesn’t want any tele-tantrums from Jim Cramer tonight, so James Bullard, president of the St. Louis Fed, served this little raw meat appetizer to Wall Street’s bellowing hordes.

The Federal Reserve should consider delaying the end of its bond purchase program to halt a decline in inflation expectations, said St. Louis Federal Reserve Bank President James Bullard.

Speaking in an interview today with Bloomberg News in Washington, Bullard said U.S. economic fundamentals remain strong, and he blamed recent financial-market turmoil on downgrades in the outlook for Europe.

“Inflation expectations are declining in the U.S.,” he said. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”

Bullard is the first Fed official to publicly suggest the central bank should extend its program of quantitative easing when policy makers meet later this month. U.S. stocks pared losses and Treasuries declined on expectations the Fed will take action to insulate the U.S. from global economic weakness.

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He Said That? 10/13/14

From Mario Draghi, president of the European Central Bank:

We don’t see a serious risk of bubbles in the sovereign market.

“Draghi: No Risk of Euro Bond Bubble,” Wall Street Journal, 10/13/14

Surely if a central banker and Goldman Sachs alumnus does not see any bubble risk for bonds from governments in Europe, some of whose economies are shrinking and have over 20 percent unemployment, there must not be any bubble risk. Wasn’t it former chairman Bernanke who assured us—just before it blew up—that there was no housing bubble?