...In the recently released Annual Report of the BIS: Bank for International Settlements (commonly thought of as the “central bank’s central bank”) the BIS made a rather ominous recommendation to it’s member banks:
Pop this bubble now.
Their specific language wasn't quite so direct, but the message was just as clear;
The risk of normalizing too late and too gradually
should not be underestimated…
The trade-off is now
between the risk of bringing forward the downward leg of the cycle
and that of suffering a bigger bust later on.
Few are ready to curb financial booms
that make everyone feel illusively richer.
Or to hold back on quick fixes for output slowdowns,
even if such measures threaten to add fuel to unsustainable financial booms,”
The road ahead may be a long one.
All the more reason, then, to start the journey sooner rather than later.
Bank for International Settlement
..It’s extremely clear from the BIS’ language, that the concept of initiating a collapse is openly discussed as a policy measure. This was a direct recommendation to bring on the crash – or as they say so colorfully, to “bring forward the downward leg of the cycle”.
...just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:
...it should be clear that I think efforts to build resilience in the financial system
are critical to minimizing the chance of financial instability and the potential damage from it.
This focus on resilience differs from much of the public discussion,
which often concerns whether some particular asset class is experiencing a ‘bubble’
and whether policymakers should attempt to pop the bubble.
Because a resilient financial system can withstand unexpected developments,
identification of bubbles is less critical.
Federal Reserve Chair Janet Yellen
What Yellen seemed to be saying — quite possibly in direct response to the BIS’s recommendations — is that the Fed isn’t in the business of popping bubbles, nor does it see a reason to intervene in their development.
So to summarize: The BIS publicly recommended popping the bubble now… and Yellen said no.
...The BIS playing hawk, and the Fed playing dove[?].
...So indulge us for a moment as we present another possibility:
Yellen is going to orchestrate a controlled collapse.
Or, at least one which we hope is controlled.
...The Fed, which has not only come under intense fire for overt market manipulation, but which is also deeply concerned with market perception, simply cannot afford to be perceived as an instrument of the market’s collapse.
So just maybe the Fed fully intends on heeding the advice of the BIS, and is strategically positioning itself as a stalwart dove to shield itself from the public fallout of it’s orchestrated financial calamity. A particularly sound play from a political perspective in the event that things don’t go as smoothly as planned.
One thing is certain at this point: An intentionally orchestrated crash is the direct recommendation of the BIS, per it’s annual report. That this action exists as a potential policy measure is now confirmed.
...Bringing forward the next leg of the cycle, may well be on the Fed’s agenda."