Central Bank Easing Expands – And It's No Coincidence
By Staff News & Analysis - February 09, 2015

Central Banks Move to Drive Down Currencies, Yielding Domino Effect … The central-bank stimulus spree of 2015 has the look of a global currency war. In quick succession, countries representing about a third of the world's economic output—from the eurozone to China, Australia and Canada—have taken steps that have driven down the value of their currencies. – Wall Street Journal

Dominant Social Theme: We must debase currencies to build them up.

Free-Market Analysis: We've been writing about this race to the bottom for months now. From our point of view, it seems like a kind of directed history.

First, central bankers announce the specter of deflation and then they gradually take steps to combat it. They also announce that the economy itself is in danger of collapsing.

But really, these bailouts probably do two things, mainly: They lessen sovereign and bank debt, and they allow banks eventually to post larger balance sheets.

Many major banks have come to participate in debasement over the past year, or have expanded programs in Europe, China and Japan. Until recently the US was directly involved in an easing program.

But now with Europe easing more aggressively and Japan stepping into another easing program, it seems like debasement has taken hold powerfully around the world.

Here's more:

Half the central banks representing the Group of 20 developed and large emerging economies, whose top monetary and finance officials meet to discuss the global economy this week in Istanbul, have taken easing steps so far this year.

The moves—mainly in the form of interest-rate cuts but also asset purchases—have ricocheted through foreign-exchange markets, driving the currencies of some countries down and those of others, primarily the U.S., up. That helps the economies of countries that are easing while complicating life for some central banks, such as the Federal Reserve, and creating challenges for exporters, from the U.S. to Switzerland and Denmark.

"There is a growing consensus in the market that an unspoken currency war has broken out," David Woo and Vadim Iaralov at Bank of America Merrill Lynch said in a note to clients, noting that the magnitude of currency-market swings this year has hit its highest noncrisis level in 20 years.

The article goes on to rebut the above conclusion. It claims that central banks and governments are not aiming to achieve advantageously debased currency but are simply doing "what they think is best for their economies."

The article even explains that there are positives regarding currency wars, as the debasement contagion often moves a variety of currencies down in value at the same time. Curiously, the article doesn't make that point, preferring to speak of "easy-money campaigns."

The article rehearses the recent history of easing. It began, we are told, with the recent announcement by the European Central Bank that it might buy back bonds in a program of up to US$2 trillion. Follow-up tremors included announcement by Switzerland that it would depeg the franc from the euro, so that the franc wouldn't be debased, too.

Denmark chose another route, cutting interest rates four times to ensure that a cheaper euro would not create a more expensive currency in Denmark. Still to come from a rate-cutting standpoint are Sweden and Poland and even the Czech central bank.

Central bankers have apparently convinced themselves that there is less risk inherent in currency debasement from price inflation. They feel free to print money and push interest rates even below the "zero bound" to create cheap money.

The article closes by pointing out that, "The U.S. is already seeing the negative effects of a stronger dollar, with trade slicing one percentage point from fourth-quarter growth. Still, its economy is cranking out jobs at a rapid pace."

This latter point is debatable, of course. Jim Clifton, the Chairman and CEO of Gallup, made recent headlines when he claimed the percentage of Americans employed full-time still approached record lows, even though the Great Recession began in 2008.

His point was that the economy really has not rebounded but that US citizens are unaware of the static nature of the economy because the numbers are regularly fudged. The official 5.6 percent unemployment rate is a "big lie," Clifton was reported as saying. Citizens working 20 hours or more are between 42 percent and 45 percent of the work force, Gallup says.

The Journal article provides us with a figure of 92.90 million Americans "not in the labor force" – who might work if they could. Of course, many probably are via black or gray markets. But such markets are not nearly so efficient as legal ones

If easing worked, it already would have. Some US$50 trillion has been dumped into markets around the world in the past six years with little to show for it from an economic stimulus standpoint. In fact, what's mainly been accomplished economically is the formation of continued asset bubbles.

It seems there will be more easing and thus more currency debasements helping stock markets and banks. But the consequences of such easing are inevitably negative when the business cycle turns.

This Journal article confirms that central banks around the world are easing and claims that such programs are serendipitous. Our preferred perspective is that they are coordinated by the Bank for International Settlements and that this debasement is part of a larger calculated plan.

After Thoughts

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Biggest Currency Reboot in 100 Years?
In less than 3 months, the biggest reboot to the U.S. dollar in 100 years could sweep America.
It has to do with a quiet potential government agreement you’ve never heard about.

  • The One Bank (that rules the world) has openings : ) Seriously!! The Illuminati now have their own website. No, I am not kidding:

  • ZIRP (Zero Interest Rate Policy) is now morphing into NIRP (Negative Interest Rate Policy). Is anyone, will ANYONE, be dumb enough to leave their money in the bank – any bank – when they are being charged for the privilege? Leave your money in the bank long enough and it will all be gone! Only a few short years ago such ridiculous business practices would have been considered impossible. Both of these policies (ZIRP and NIRP) are – by intent and design – DEflationary and destroy capital. These policies are NOT – as we are told over and over – “stimulative”. Anyone with their eyes open can see where things are headed and – in fact – where things already are.

  • Danny B

    Related; “In the Golden Age of the Central Banker, where understanding and controlling market behavior is
    at the heart of regime survival, this data is quite literally priceless.”
    The printers can print but, they don’t create wealth. We have currency inflation at the same time as wealth reduction. Only consumption can stimulate wealth production. The Western PTB would like for us to continue our previous consumption patterns even though our earning power has crashed. They try to entice us with credit that we can’t qualify for. Out of desperation, they offer us credit if we lie well enough.

    Their would-be inflation is not the same as printing. Their creation of the availability of credit is just not the same as printing. The money supply is defined as the sum of currency and credit. They should NOT be grouped together. A credit line is a debt not yet realized. A unit of currency is a debt realized. Our inflation is proportional to our wealth creation. The PTB can temporarily inflate the financial markets but, they will eventually revert to reflect the true wealth.

    • Tom kauser

      Great article? Never get enough of HAL9000 AND THE STARCHILD!

  • Tom kauser

    Banks balance sheets are stronger all the rest is nothing but media fluff? Unspoken currency wars since 1973? Of course if you followed things longer than day to day you would be looking back to BEIJING and the Olympics build. The Fed was fighting inflation caused by Chinese construction demands and some leftover housing demand back home?
    long story short the Federal reserve raised interest rates to kill an inflation problem that disappeared after Beijing and crushed the world economy and printed dollars to send to Europe because of their balance sheet problems caused by the dollars weakness caused by the Feds stupidity? Which gave PAULSON the means to crush his buddy Dick FULD over two years later!
    Even back in 2006 WHEN EVERYONE SEEN IT COMING the collapse stayed away for 16 months and needed some big firms to give up their seats on the Fed Board to get here!

  • Tom kauser

    If you really look at the Fed you see its QE as forcing money out and not into the system? the QE was sent to Europe and now means are being made to transfer that money back home. The central banks work together CALL IT WAR if you want and the Fed wont care because they like war a lot all ready?

  • Tom kauser

    So Maria in a Plosser interview ” how long would it take to unwind the Fed balance sheet of trillions”? Plosser replies 5-10 years! About the time it will take the debt to mature because the balance sheet is nothing but 5-10 year paper(not addressed?)Blank look and a great from MARIA B.! Priceless!

  • Bill Ross

    “They also announce that the economy itself is in danger of collapsing.”

    Yep, too much economic “snake oil” medication, skewing the balance of power between the unproductive and the productive, destroying the motivational economics and mere possibility of productivity under regulatory “control”.

    Well, what cannot go on, must end (the Gipper):

    have I ever mentioned: Regulation is FUTILE?:

  • The Central Bank easing has expanded so much that CBs are now – for the first time – buying ALL government debt worldwide:

  • Bill Ross

    A “theory”

    The economically sane are conserving resources, hanging on to “cash”, not spending, preparing for hard times. By the laws of supply and demand, this leads to deflation, less demand, goods and services worth less.

    The unproductive, by printing their own “wealth” and giving it to their cronies are sucking up real property from those at the lower economic tiers who are on the edge of survival due to economic predations, collapsing ability to find any productive role. So, fleeced of property, moved into the ranks of unproductive whiners, dependent on political whining to achieve survival goals.

    Thus, the “plan” is feudal overlords and the paupers, no middle class and, decreed “illegal” to have any sort of economic pulse, without a regulatory “cut” to our unproductive “owners”.

    The root cause of their “win” is because of rationalizations that we have no property rights, even to our own bodies and labor. They have decreed their own property rights, even of owning us.

  • Bruce C

    I think the DB is giving the central banks too much credit. They are just desperate. There is no way to win a currency war. The first one to zero loses first, followed by everybody else. And don’t tell me that somehow chaos is going to be good for them. If chaos is so great then why didn’t they deep-six the world economies a long time ago? Why don’t they just launch “operation heliecopter?” That would both devalue currencies AND create chaos. Carpe Diem!!!

    Here’s an article that reveals more desperation:

    Go Greece!!!! I believe Tsipras is a true fanatic and it’s entertaining to watch. Obama wants the EU to compromise with Greece. Germany wants Tsipras to honor the agreements of Greece’s previous “more conservative” government – the ones who agreed to indenture the Greek people without their permission (as with everywhere), and now they’re out of office. Screw the EU. Mr. V. told Italians that the EU will collapse if Greece exits, and that angered EU officials. Italians could have never figured that out on their own!

    T. and V. better watch their backs and get back to Greece.

  • A statement of purpose, for the Central Banks:

    “Our economic strategy is to lose money on every purchase, but make up for it in volume.”

  • Danny B

    Just a reminder;
    “If we need a Fed at all, it is the one designed by Carter Glass 100 years ago. That
    is, a “bankers bank” that was intended to provide standby liquidity at a
    penalty spread above the free market interest rate in consideration for
    good collateral originating from inventory and receivables in the real economy.”

    penalty spread,,, good collateral.
    We are cursed with way too many banks. They couldn’t all be saved. ZIRP transferred $ 250 billion a year in lost interest to the banks so that they could reflate.