One who intends to leave others better off for his having existed.

8/1/14

"GLOBAL MONETARY DELUSION – "MORE COWBELL"; MASH UP

...“More cowbell” is a reference to a Saturday Night Live comedy skit in which a celebrity music producer (played by Christopher Walken) keeps telling the cowbell player (Will Ferrell) in a second rate band to play louder in the hopes of creating a better sound.

It did not work, but it was funny.

“More QE cowbell” as the cure-all to what troubles the global economy is also not going to work.

And it is not really funny...

Central bankers think they are the masters of the universe because the world is looking to them (and only them) to deliver continuous stability and prosperity. ...they plow ahead, expressing total confidence that what they are saying and doing is wise and not dangerous drivel. These master chefs have but one vat next to them on the policy table, and it is labeled “QE.” [Quantitative Easing (electronic money printing/monetary inflation)]


...monetary inflation is a transfer of wealth from the public 
to the creators of new money and credit.


The supposed stimulation of an economy by monetary means 
...once embarked on that is difficult to stop 
without exposing the true weakness of government finances 
and the fragility of the banking system...

[Our global economic and political leadership] seem to think that all they need to do is dip into this vat, ladle on some QE, and asset prices will rise, the economy can be supported, jobs can be created and growth can be achieved. With no side effects, no indigestion, and no other factor would make them put the vat away and demand other ingredients.

...The issuers of new currency and credit [QE] are governments and the banks, both of which reap the maximum benefit of utilising them before prices rise.

The ultimate losers are the majority of the population: 
by the time new money ends up in wider circulation 
prices have already risen to reflect its existence.

...monetary inflation transfers real wealth from ordinary people on fixed salaries or with savings. ...from the public to both the government and the commercial banks, which is in addition to visible taxes, is strangling economic activity...

...global monetary policy is currently extremely dangerous.  The financial system continues to be opaque and overleveraged. Major financial institutions are still essentially dependent on government guarantees to protect them if there is a renewed financial crisis.

An abrupt shake-up could occur at any time.

Since confidence in "paper" money, central bankers and political leaders is unjustifiable and out of line with reality, the loss of such confidence could conceivably occur at any time, leading to the next “run” on the global financial system.

Those great sages who think that countries in the developed world 
have decades to get their financial systems and entitlement programs in order
are delusional. 

...Signals between QE, consumer prices, asset prices, bond prices, stock prices and growth are completely awry because governments are pulling the strings to a degree never before seen in free enterprise systems. It is unlikely that these unprecedented and experimental government policies of such gargantuan scope will actually create the desired result and allow themselves to be able to be unwound without great shock and disruption to the global financial system.

......an intense quest for yield is driving down volatility and interest rates regardless of credit quality.

...the world is hooked on easy money and has forgotten the lessons of the financial crisis.

In the introduction to the [Bank for International Settlements annual] report, the BIS said:

...[T]he temptation to postpone adjustment can prove irresistible, 
especially when times are good 
and financial booms sprinkle the fairy dust of illusory riches. 

The consequence is a growth model that relies too much on debt, 
both private and public, 
and which over time sows the seeds of its own demise.

Federal Reserve approved Bank for International Settlements report
2014

The Fed has created the fuel for another crisis, seems to know it judging by the BIS report, and yet is covering itself with an "I told you so" report from the BIS rather than changing course.

...It is duplicitous for the Fed to authorize the views in the BIS report yet keep quiet about them elsewhere. But then, the Fed has never accepted much responsibility for the 2008 crisis, despite its decisions to keep interest rates artificially low for an extended period of time, to do a poor job of regulating the banking system and to abet Fannie and Freddie in their utter irresponsibility.

History rhymes.

...Substantial inflation is occurring in many asset classes and service sectors of the global economy, but is not presently recognized or captured by the traditional metrics upon which the Fed relies.

...Governments and central banks have made little or no progress in recovering from the Lehman crisis six years ago. The problem is not helped by dependence on statistics which are downright misleading.

...It stands to reason that actions based on wrong assumptions will not achieve the intended result. The assumption is that money-printing and credit expansion are not having an inflationary effect, because the [misleading] statistics say so....

Governments with the burden of public welfare costs are in a debt trap from which they lack the resolve to escape. ...The crisis will indeed come, but it will probably have its origins in the inability of individuals, robbed of the purchasing power of their fixed salaries and savings, to pay the prices demanded from them by businesses.

...The welfare-driven nations continue to impoverish their people by debauching their currencies.
As Japan’s desperate monetary expansion now shows, far from improving her economic outlook, she is moving into a deepening slump...

...Not even zero or negative interest rates will save the banks from this increasingly certain event, for a very simple reason: by continuing the transfer of wealth from individuals through monetary inflation, the cure will finally kill the patient.

Unfortunately we are all on the path to the same destructive process.

This inflation is spreading in both scope and intensity. If and when it breaks out in an inescapably broad way, there will be a crowd of seriously confused policymakers making excuses and claiming that inflation does not in fact exist; it is not their fault; it was completely unpredictable; and/or it will actually be good for people.

...if and when inflation goes from being something that affects only a particular list of assets (a growing list, presently a combination of things owned by the well-off plus a number of things that are basic necessities) to a widespread “in-your-face” phenomenon affecting the cost of living of almost the entire population, then the normal yardsticks of risk, return and profit may be thrown into the garbage can. These measures may be replaced by a scramble by citizens and investors to preserve value on a foundation of shifting sand, together with societal unrest that may make the current politically-useful “inequality” riffs, blaming the “1%” and attacking those “millionaires and billionaires” who refuse to “pay their fair share,” look like mere warm-ups for real class warfare."

http://www.cobdencentre.org/2014/07/the-coming-slump/

http://www.zerohedge.com/news/2014-07-31/elliotts-paul-singer-gold-inflation-and-global-monetary-delusion

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