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

6/28/15

The Central Bank Emperors with no clothes; Greece Edition

Since the 2008/9 financial crisis, the world's central banks, largest financial institutions, wealthy investors, advertising dependent media, paid for economists and entrenched politicians dependent on campaign cash/ bribes etc..., have been kicking the economic reckoning can.

Quantitative Easing caused low interest rates to prop up real estate, financial markets and social spending by financing public deficits with money created out of thin air.

Artificially imposed stability creates ever larger levels of real instability, no different than those with addictions to harmful substances.

Monetary heroin.

Most global central bank balance sheets have at least doubled in seven years, and the European Central Bank came late to the game, with the worst balance sheets, the exception being Japan, which may reap some unintended consequences from Greece's financial mess.

Like Greece did after entering the Euro, many smaller European countries enjoyed the benefits of borrowing far more than could be repaid.

Other countries who could, took advantage of low interest rates while printing money to keep their respective currencies low relative to the US dollar.

When the Federal Reserve announced it would stop printing, US long term interest rates rose, affecting rates across the globe.

Then corporations stepped in with share buybacks.

Then England Japan, Switzerland and then Europe among others stepped into the printing breach.

If confidence falls and interest rates rise, the value of the underlying debt falls.

If values fall on government and corporate debt outside the US along with stock markets, investors should likely increase the extrication of monies from what appear to be more risky ventures, allocating heavily to perceived safe havens, compounding the affects of the problems triggering the bank runs.

The more investors begin to realize Quantitative Easing (printing money) didn't work, the sooner Emperors will appear to be holding up a financial house of cards, forcing the house to collapse with greater speed.

As the global economy is clearly slowing, many who didn't understand yesterday are suddenly awake, looking at naked Empires, now that the veil of QE can be seen for what it is.

I believe the world faces a massive debt restructuring, where investors and financial institutions take the hit instead of government bailouts like last time.

It's just a question of how and when a very pushed on string snaps back in the 1%'s faces.

This has taken far too long, which means the consequences are likely greater.

George Hartzman

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