News & Analysis
Investors Beware of Central Banks Bearing Austerity
IMF: Central banks must be responsible for financial stability ... Financial stability should become a core central banking objective alongside monetary policy, although potential conflicts between the two functions might require some institutional redesign, the International Monetary Fund (IMF) said. The IMF noted in a study that although central banks had delivered low inflation, they had failed to prevent the devastating global financial crisis of 2008–2009. As a result, the IMF said new tools were needed to prevent excessive risk-taking, and that central banks may be best-placed to take on these tasks, although monetary policy should stay primarily focused on price and output stability. – Star Online
Dominant Social Theme: Central banks need to reduce the supply of money.
Free-Market Analysis: We were struck by a modest report (excerpt above) in the Star Online because it shows us once more that when it comes to monetary control, the International Monetary Fund is a big booster of central banking.
The IMF and the world's current monopoly-model central banks work hand-in-glove; this is simply an unfortunate fact.
The powers-that-be set up a financial and economic system after World War II to keep the rest of the world, especially the developing world, in a kind of penury. The poverty is to be lifted only as the IMF and Bank for International Settlements (BIS) decide to do so.
Japan was flooded with cheap money in the 1980s and the Japanese exported and purchased US Treasury bonds – further funding the US deficit. China was flooded with cheap money and purchased US Treasury bonds, funding the US deficit. And like Japan, China benefited from torrents of currency, which enriched not just state coffers but also the pockets of the people.
The next target, as best we can figure, is Africa. Africa is to be consolidated and turned into a neo-Chinese/Japanese play. Africans will be exposed to cheap money and its benefits. The world will learn once more that central bankers are a kind and generous professional group – dedicated to alleviating poverty in the world's most difficult regions.
There is no doubt that printing massive amounts of money can set an economy afire. But like any conflagration, the fire is likely uncontrollable. Economies triggered in this manner are soon distorted, with many businesses being started and even expanding significantly that would not even exist in a less stimulated environment.
A fiat-currency economic boom is bound to be unstable and fiat money economies in the long term are unstable as well. The US economy has all but been destroyed by fiat currency stimulation.
Manufacturing has moved abroad and US workers face a bleak future amidst low-paying service jobs. In China, Brazil and India – all economies stimulated mightily by central banking – there are obvious distortions as well. Price inflation is rampant and certain sectors boom almost uncontrollably.
Nonetheless, IMF honchos wish for yet more central banking control. Here's more from the article excerpted above:
"The interaction between monetary and macro-prudential policies has implications for institutional design. Policy coordination can improve outcomes, making it advantageous to assign both policies to the central bank," the IMF wrote.
The crisis sparked a push for widespread financial reform, led by the Group of 20 of advanced and emerging economies.
But harnessing monetary policy to the goal of financial stability is controversial in central banking circles, where the consensus that policymakers should concentrate on inflation and growth has been strained by the lessons of the crisis.
The US Federal Reserve's vice-chair, Janet Yellen, in a speech early last month, said financial stability was essential to sustained economic growth and prosperity. That connection is implied by the US central bank's dual mandate of supporting full employment along with low and stable prices.
A central bank does one thing really well. It prints money. The idea that central bankers can "create employment" long-term or even more questionably "stabilize" a given economy is dubious in the extreme. Yes, it's true fiat money printing can create massive booms but such economies are inevitably unstable. Economic reality is traduced by over-printing of paper money.
That the same central bankers that create money booms should also preside over so-called macro-prudential policies is fairly ludicrous. It is, in fact, a subdominant social theme: Central bankers are so good at larger monetary policy that they should also moderate economies from a risk standpoint.
That's what macro-prudential policy is. It's a fancy way of saying that central bankers should reduce money printing and lending if they feel the economy is getting out of hand. Having produced the problem, they are now expected to preside over its resolution. Such policies are commonly called "austerity" – and we can see how well they work in Europe.
Spanish and Greek youths are rioting and there is unrest elsewhere, as well. Economies throughout the EU are being further leveled by EU prudential policies. The idea that central banks can rationalize risk any better than officials can calculate how much money an economy needs is a foolish one.
Human beings cannot predict the future and market competition is the best way to decide these things.
Conclusion: Investors take care. As these policies take effect – if they do – realign your portfolios accordingly. Nothing kills growth like a central bank determined to moderate its member banks' monetary behavior.
Posted by 1776 on 02/08/13 02:36 PM
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Posted by 1776 on 02/08/13 01:20 PM
Ron Paul: I'm Waiting for the Fed to Self-Destruct
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Posted by terry on 02/07/13 12:26 PM
Announced today Thurs Feb. 3/2012 on CTV news [ Toronto Canada: Mark Carney still running Bank of Canada: So he is on BIS and Governore of Bank of England - can anyone spell One World Global Banking governance?
The Canadian Curator.
Posted by Abu Aardvark on 02/07/13 07:00 AM
dave jr on 02/06/13 08:15 PM wrote: "Ask the critical questions, it is a learning proccess for all of us. Name calling is nothing but a disruption. "
Agreed. In fact, one of the rather amusing features of debunking the overall ponzi is that the simpler you keep the questions, the more obvious the entire fraud gets. Here's Hans Hermann-Hoppe - demonstrating the case:
"It is very important in replies to people like Paul Krugman, that we don't get involved in technical details. Ask some questions almost like a child. Explain to me how increases in paper pieces can possibly make a society richer. If that were the case, explain to me why is there still poverty in the world? Isn't every central bank in the world capable of printing as much paper as they want? I am sure the guy cannot answer this type of question. Nobody can answer this type of question. We always get bogged down in technical details of his argument instead of always repeating this question: Please explain to me how a piece of paper can make society richer."
Click to view link
Posted by amanfromMars on 02/06/13 11:10 PM
Are all government bonds/gilts/treasury notes/call them what you will, ponzi ious issued by intellectual property bankrupt entities and a certain sure fire indicator to one and all of that fact, and monetary system admins must necessarily support concealment of facts in the pimping of increasingly fantastic and fraudulent fictions so that those popularly perceived/conceived by the ignorant masses to be in charge and in powerful control of things/government, are not discovered to be actual and factual control of nothing or anything?
And such fraudulent entities are in that collapsing reality of their own making, and quite rightly so in this enlightening new age of instantly shared global communications with alternate valid views being expressed and proven to be impossible to deny are more true, now running scared and in fear of their lives as the scam continues to unfold and highlight their systemic deficiencies and intellectual deficit, to be ruthlessly exploited to destroy them and their power systems should they not engage with others in a different form of system which will save them?
And can you imagine whenever one is in powerful control of nothing, does CHAOS take over? And is IT a saviour whenever in its guise of Clouds Hosting Advanced Operating Systems?
The premise shared here/there, is that it can easily be so ... . but obviously will be provided by others who would be Master Pilot Controllers of CHAOSystems.
And I wonder if your Google of "Master Pilot Controllers" returns the same pages of info as are presented to me?
DB, You are not wrong in advising/sharing/propagandising/educating and entertaining us all with the fact that the Internet Reformation has changed and is changing everything with knowledge and live active and reactive/proactive and HyperRadioProActive feedback teaching any and all of that which is, and still yet to be realised by virtual production in mainstream media presentations for New Orderly World Futures.
The trick to be able to influence and driver future reality plays is to accept that the future will be nothing like the past, and that which one might at first dismiss as being crazy and a bit of a rant, is actually quite simply clever and a novel noble work of quiet genius genus/positive studied consideration which has been tempered and tested to survive and be failsafe by virtue of experience and self-experiment/comprehensive and continually searching and vigilant virulent beta testing for faults and weaknesses and vulnerabilities, and of the same for reinforcing of defences against attack through those vectors and hosting sectors whenever faults are found.
Posted by annmarie on 02/06/13 10:05 PM
I just finished watching Zeitgeist. Is it true that every dollar printed has an "x" percentage of debt attached to it? Is it true that central banks don't issue currency, they loan currency with interst due? Is it true that this Ponzi scheme of debt can NEVER be paid because the banks must keep increasing the money supply in order to pay the interest owed on the ever expanding debt?
I'm in shock - and amazed that we don't call for a second American revolution. The entire financial system - if the film is accurate - is one sick, evil joke!!
Reply from The Daily Bell
You are better off reading Click to view link than watching Zeitgeist ...
Posted by Danny B on 02/06/13 09:53 PM
Dear Bell, I think that you will find this interesting. The last line says that GB needs to find a new model for growth. My reading and exposure is VERY wide. A new model doesn't immediately come to mind.
Events Officer, Alumni and Development Office,
Trinity Hall, Cambridge, CB2 1TJ
01223 332555 events@Click to view link
Trinity Hall Registered Charity Number: 1137458
Trinity Hall Forum
GOING SOUTH: The British Economy in the Relegation Zone
by Larry Elliott, Economics Editor of The Guardian
Monday 18 March 2013, 6.15 - 7.30pm
The Graham Storey Room, Trinity Hall, Cambridge CB2 1TJ
FREE ADMISSION BUT BOOKING ESSENTIAL
Contact: Dr Claire Daunton or Mary Richmond
01223 332555 or events@Click to view link
Larry Elliott is a British journalist and author focusing on economic issues. He is currently Economics editor at The Guardian, and has been with the paper since 1988.
He is the co-author of four books with Dan Atkinson - The Age of Insecurity in 1998; Fantasy Island in 2007, which warned that Britain's growth under New Labour was a debt-driven illusion; and The Gods That Failed in 2008, an analysis of the events and forces that brought the global financial system to the brink of collapse. Their most recent book, Going South: Why Britain will have a Third World Economy by 2014, was published by Palgrave Macmillan in 2012.
Larry's areas of speciality are the UK and global economy, trade and development. He was part of the group that put together the proposal for a Green New Deal, published by the New Economics Foundation in 2008. He graduated from Fitzwilliam College, Cambridge in ---. He is a visiting fellow at Hertfordshire University, a council member of the Overseas Development Institute and an adviser to the Catalyst thinktank and Red Pepper magazine.
The financial crash and recession of the past five years has exposed deep, structural weaknesses in the economy. These weaknesses have been evident for at least a century, and the result has been 100 years of relative economic decline punctuated by brief periods when economic performance has been respectable. Over the past 30 years, Britain has ceased to pay its way in the world, running bigger and bigger trade deficits. Consumers have lived beyond their means thanks to the re-cycled proceeds of North Sea oil and because financial deregulation has permitted the build-up of excessive amounts of personal debt. The economy became increasingly lop-sided both in terms of the dominance of one sector, finance, and in terms of one region, London and its penumbra. In the bubble years before the crisis, the economy was running on three engines: the City, the housing market and the public sector. All three stalled in the crisis, and there is nothing to take their place. Unless Britain is to have much lower levels of growth in the future, it will require a new growth model.
Reply from The Daily Bell
It is certainly an interesting statement. Thanks.
Posted by amanfromMars on 02/06/13 09:11 PM
Here's a British Brainwashing Corporation report of Ireland going all Greek and passing the exploding parcel on down the line for someone else to detonate ... ... . Click to view link
Posted by dave jr on 02/06/13 08:15 PM
@ Howling Wolf
It was only a few years ago where I thought/said similar things. Please don't be so hard on anyone visiting the DB. All should be welcomed with open minds. Ask the critical questions, it is a learning proccess for all of us. Name calling is nothing but a disruption.
Cheers, my friend.
Posted by Howling Wolf on 02/06/13 07:57 PM
@ Dave Jr.
My friend, no need to try and educate that boy. Clearly he does not understand the cause of inflation and only understand the effects he can see. Mr Mitchell has some learning to do.
Posted by Howling Wolf on 02/06/13 07:55 PM
Troll alert! What a moron you are Mr. Mitchell. Why don't you go spread your BS somewhere else. Perhaps as the DB suggests CNN may make a great forum for your lack of intellectual prowess.
Monopolised fiat money = fraud. Pure and simple. Get it, simpleton?
Posted by 1776 on 02/06/13 05:29 PM
Dubai Ice Rinkstar An Olympic-size ice rink, open to all!
Click to view link
It appears all we are doing is subsiding Dubai! I am sure this was nothing but propaganda! RIGHT?
Posted by Jeanna on 02/06/13 04:04 PM
They have a license to steal. Expect them to use it any they can.
Posted by Martin Sobek on 02/06/13 03:59 PM
How to become a Deus ex machina:
1. Engage in financial sector (preferably banking)
2. Become a No.1 money lender (printer) for local leader
3. Use gained influence to obtain important industries (banking, media, armament, education, etc.)
4. Through Private Family Foundations start to fund lunatics (group of people with nice uniforms and low moral)
5. Stir up your new friends to create "democratic, economically free, fair" authoritarian dictatorship.
6. Monopolize money
Congratulation!! You have successfuly enslaved local population.
7. Repeat the process in the next region. Go to point 1...
Posted by dave jr on 02/06/13 03:40 PM
"There has been no inflation, even despite low interest rates. In fact, the U.S. came closer to deflation than inflation. How do you explain that?"
Roger, there has been significant inflation in the essentials of life and deflation in non essentials. Namely commodity acqusition requires more labor. Does that help your idea of 'sovereignty'?
Posted by venkat on 02/06/13 03:19 PM
$ can be a monetary sovereign as much as it wants but not a reserve currency. Why $ can print way more than Zimbabwe. Btw Zimbabwe govt balance is $ 217. All the smaller countries will revolt against $ con before Russia/China do. Just watch.
Posted by RodgerMitchell on 02/06/13 03:05 PM
Sadly, you folks don't understand the difference between Monetary Sovereignty (U.S., Japan, Canada, Australia et al) and monetary non-sovereignty (the euro nations), so you claim that "The US economy has all but been destroyed by fiat currency stimulation."
Utter nonsense. The U.S. economy was injured by the mortgage bubble, and was partially revived by dollar stimulus. Sadly, the U.S. politicians now are preaching austerity, which is a government's method for widening the income gap between the rich and the middle class.
You folks rail against money creation and austerity at the same time. Can't make up your minds. Here is the absolute fact: If the U.S. had created too many dollars, there would have been inflation. Period.
There has been no inflation, even despite low interest rates. In fact, the U.S. came closer to deflation than inflation. How do you explain that?
First learn Monetary Sovereignty; then write articles.
Reply from The Daily Bell
Are you making a joke, Roger? You come to this place and this website to provide a mainstream monetary analysis?
Did you mean to drop by CCN?]
Here you will learn that the US can export dollars because it exorted the Saud family into trading oil for dollars only and then creating an artificial energy scarcity around the world that only the Sauds could fill.
All other countries have to hold dollars to buy Saud oil and the US Fed can print as many as it wants, basically.
This game is coming to an end however, partially because of the Internet and partially because the elites have decided to end it.
What comes next is an object of speculation. But you need to learn more about real monetary history in order to make educated guesses.
Posted by venkat on 02/06/13 02:30 PM
No Central bank flooded their country with cheap money as much as Fed did within USA and globally. No one ran the empire that size, and conducted so many wars across all continents. It is the $ hegemony, and whenever any bias understates $ linchpin role, folks can spot it right away. The sun rotated around the earth, and that was corrected. The global economy is based on the wrong $ foundation, and that will be corrected.
Posted by dave jr on 02/06/13 01:15 PM
A tribe in the heart of Africa isn't too unlike a community anywhere. A tribe relying on its environment for countless generations only wants to be left alone, yet more than likely would welcome trade on their terms. Western policy sees them in their loin cloths and deems them poor. They must be lifted from poverty. Is this true?
How many examples do we need to see where resource extraction by globals devastates a local economy. The means of survival destroyed, the industry offers to employ only a fraction of them. Now, they are truly impoverished, needing subsidy, aid and charity from you and I.
But thats OK, so long as a car cost us $1000 less, or an appliance $50 less, or a pair of sneakers $5 less... right?
Enjoy the spoils, the hush money of the captors. And don't complain when choice narrows toward non-existance. Monopoly wins when we are too fat dumb and happy to protest. Enjoy the bliss during the interim and work on a good story for the children.
Posted by 1776 on 02/06/13 11:47 AM
U.S. Dollar Collapse: Where is Germany's Gold? By Peter Schiff Global Research, February 05, 2013
Click to view link
Reply from The Daily Bell
Good link. Thanks.