Keynesian central banking is the command economy, not free markets, and after eighty odd years from the Bretton Woods conference, the endgame is fast approaching, the road to our serfdom put on steroids since the GFC with a central bank stimulunacy that is – in my opinion – criminal.
Frighteningly this week a Fed branch has published a piece on negative interest rates, indicating to me that in America’s coming recession the Fed will be using negative rates, and of course it will because its pathetic effort at the tail end of 2018 to tighten monetary policy almost broke Wall Street and world sharemarkets in December, to the point where Fed Chair Jerome Powell had to capitulate and stop the tightening, knowing the Fed is now forevermore – well, until the Great Reset – Wall Street’s bitch. If an economy has so many debt-zombie firms it can’t even raise its cash rate a quarter of a percent, that speaks to the weakness of its supposed recovery.
And now IMF publish this nonsense, seemingly not understanding it’s a narrative befitting an episode – to give away my age – of the Twilight Zone:
Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.
Negative interest rates – no; deeply negative interest rates – a feasible option: no, they’re a hatchling from a command economy asylum. Central banking is now deep down the rabbit hole and soon the light will be snuffed out.
But the point I want to make in this post is something never touched on in the business press: that is the immorality of central bankers whom consciously decided to throw elderly fixed income investors under the party bus of increasingly extreme, increasingly lunatic, speculators. And so I posted the below to that IMF paper thread – make of it what you will, that my comment got moderated off:
Central banks don’t seem to understand the immorality of what they have done over last decade in destroying yield. The main fixed income investors are the elderly (and by the by charities): yet this group has had its income from savings (thus the savings) destroyed. They were sacrificed to the speculators on Wall Street and the property market. Worse, because company cash flows are now discounted at near zero because the speculators have figured out there’s no way to get yield back without bankrupting a catastrophic number of debt-addled zombie companies and zombie governments – including certainly the US – this has led to bubble valuations and caused a lethal disconnect between markets and actual economies. All this and the small amount of stimulus we now get from trillions of dollars of central bank money printing: it’s been an economic suicide for the West, because we can no longer avoid the Great Reset needed to find yield, again, and because debt ultimately suffocates economies, that Great Reset (which is the end of order) is inevitable: but my point is it has been deeply immoral. We were so much better served by free markets and capitalism over this central banked command economy model, which dies under hubris (as all command economies do).
Furthermore, the minute central banks thought it somehow sane to even consider negative interest rates, as in this article, let alone use them, then we were in a Harry Potter economy: laughable if the consequences weren’t going to be so lethal.