Gloom and doom are starting to spread, despite the increasingly hollow-sounding reassurances being provided on an uninterrupted basis by nearly every central banker who comes within hailing distance of a microphone. [Extracted from ‘Midweek Macro Musings‘, Click Here for details]
To see how incessant this din has become, take the example of just a few days’ recent newsbites. The PBOC’s Sheng said China could hit the magic 7% – the target it had supposedly abandoned – since it had ‘large room for macro adjustment’ – resort to which it had previously forsworn. Israel’s Flug said he might use ‘any tools, at any time’ to address his country’s woes. Sweden’s Ingves averred he was ‘highly prepared to act’ (to loosen policy yet further) even though the Debt Office’s Lindblad was simultaneously having kittens over the soaring levels of household debt to which this had given rise.
Norway’s Olsen excited suspicions that he had abandoned his CPI target (this shibboleth of Right-On macronomics being a decidedly asymmetrical entity, it seems) by cutting rates despite accelerating price rises. Taiwan’s Perng did the same, commenting that he was ‘boosting effective demand’ (that old chestnut!). The ECB’s Likanen, wrestling with a nasty rise in Finnish unemployment, said the Bank is ‘ready to take all necessary measures’ – by which he meant only the application of a heavier dose of the medicine which has demonstrably failed to prevent his nation’s current woes from worsening to date.
Madame Yellen went through the undignified contortions of being too ‘uncertain’ to effect a rate rise whose very suspension, it has been credibly argued, is a major cause of that same uncertainty, only to try to sound convincing a short while afterwards when she threatened that this paralyzing Clausewitzian fog would be dissipated by year end. An avid believer in the cult of ‘Expectations’, our esteemed Fed Chairwoman seem unable to understand that the Emerging Markets to whom she is now extending her ultra vires concern may have already sold off to discount the expectation that she and the shilly-shalliers on the Committee will soon steel themselves to do what everyone assumes they one day must.
The BOE’s Haldane, meanwhile, follows an exercise in which he works out that interest rates are now the lowest in all of recorded history with a worried declaration that risks are nonethless ‘squarely skewed to the downside’ – a fear he voices even as UK mortgage borrowing surges higher and as the country continues to suck in a record consignment of debt-financed imports. Worse, our man would abolish cash (and with it the last vestiges of privacy and property rights), using Bitcoin technology to update Silvio Gesell and impose negative interest rates on his fellow Brits à outrance. Thus he would ensure that no escape could be had from his, Haldane’s, one prescription of how they, the diverse and disparate many, should be balancing their present against their future needs.
When will they stop? When will they reassess what they are doing and start to recognise that they are the root cause of all too many of our woes and not the providers of the solution to all worldly ills?
As Barron’s put it plaintively in a recent headline: ‘Why is China’s PMI falling after all the rate cuts?’ The answer? Because easy money is no panacea for a horribly incoherent capital structure: one which has become tangled up in a Gordian knot of ill-judged investment, distorted entrepreneurial vision, and sub-marginal opportunism by the interactions of a flawed financial architecture with wrecking-ball swings in interest rates, currency parities, and ‘macro-prudential’ regulations – among the many other forms of legalized violence routinely visited upon the market process by the organs of the state.
Ban Ki-Moon may well be employed to publish deeply illiberal and wholly vainglorious wish-lists of Collectivist ‘progress’ from the podium of the would-be global Gosplan of the UN; the new Pope may see it as his mission to broadcast readings from the Gospel according to St. Karl (or, at least, from that according to St. Juan), but Mario Draghi, Haruhiko Kuroda et Cie. are theoretically not charged with the salvation of the world – or even with the reordering of their own nations’ political structures. Their sole purpose is to preside over the narrow, technical exercise of that limited range of functions which aims at correcting the intrinsic errors of a sometimes wayward monetary system – albeit ones which, ironically, the morally hazardous existence of their own institutions can only make worse.
Rather than persisting in their damaging alchemy, the sooner the perpetrators lose their current unholy faith in their own sheer indispensability, pay heed to the Ghosts of Central Bankers Past, and retire to the stern minimalism and habitual reticence of the best exemplars among their predecessors, the better for us all!
THE ABOVE IS AN EXTRACT FROM THE BIWEEKLY ‘MIDWEEK MACRO MUSINGS‘, OFFERED ALONGSIDE THE FULL IN-DEPTH MONTHLY, ‘MONEY, MACRO & MARKETS‘, BY HINDESIGHT LETTERS.
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