As the world's advanced economies grow at half the speed of the pre-crisis years amid persistently high unemployment, governments are turning to a new set of monetary-policy makers who in word — and they hope deed — are more aggressive than their predecessors. A revolution that began with the arrival in November 2011 of Mario Draghi at the European Central Bank now is gathering speed as Canada's Mark Carney joins the Bank of England and the Bank of Japan awaits a new governor. The shift could culminate a year from now if Federal Reserve Chairman Ben S. Bernanke is succeeded by someone even bolder. – Bloomberg
Dominant Social Theme: The new breed of bankers should do whatever they like, so long as it is radical and pumps yet more money into dormant economies.
Free-Market Analysis: Just when we think the meme of the all-knowing central banker can get no worse, we learn otherwise. Today's central banker, Bloomberg tells us, is supposed to be a reckless gunslinger, taking chances because there is little left to lose.
Do you feel better now?
The changing of the guard reflects both a need for central banks to offset fiscal paralysis and a bet that monetary policy remains a potent force. At the same time, investors are increasingly weighing the costs and benefits of quantitative easing, while suggesting too much is expected of central banks.
The appointments of activists "reflect the case that economies are still struggling to sustain solid recoveries and there's pressure from political quarters to be more stimulative," said Nathan Sheets, a former adviser to Bernanke and now global head of international economics at Citigroup Inc. in New York. "Central banks have stuff in the
The aggressiveness — actual or anticipated — already is affecting markets. The euro is up 9.5 percent against the dollar since Draghi's July 26 vow to defend the single currency, and the yield on Spain's 10-year bond has fallen more than two percentage points to 5.2 percent since July 24.
The Japanese yen is down about 15 percent compared with the dollar since mid-November in anticipation of new Prime Minister Shinzo Abe's plans to refocus the Bank of Japan on beating deflation. U.K. inflation expectations are near the highest since April 2011 amid speculation that Carney, currently the Bank of Canada governor, will spur prices.
The promotion of policy makers who support stimulus encourages the recent pivot away from bonds and into riskier assets such as stocks, said Andrew Milligan, head of global strategy at Edinburgh-based Standard Life Investments Ltd. It also is forcing investors to consider ways to protect themselves against long-term price pressures through inflation-protected bonds and real estate, he said.
"Central bankers have begun to redefine what their role is, moving away from inflation targeting toward sustaining the health of the financial system, indeed the wider economy," said Milligan. "New policy makers may bring in new tools, ones which global investors will need to understand quickly."
This is actually a somewhat unexpected evolution, given the amount of criticism that central banking has received in the past five years since the 2007-2008 financial crash. But this evolution is also in a way expected, given that central banking is not a normal activity but an elite dominant social theme.
Without central banks, an evident and obvious power elite that wants to create an official world government would not be able to fund its world-straddling activities. It takes incomprehensible amounts of money to create the kind of directed history that can change the world.
Central banks provide the necessary funding but central banking is a delicate and dangerous activity. Central bankers can NEVER tell how much money ought to circulate in an economy and they can never tell what the value of that money ought to be – but they are regularly called on to make both decisions.
This process provides two results. First, it impresses on people that there is indeed a technocratic elite that has the right to print trillions while most people juggle tens and hundreds. Second, the inevitable failures of monetary policy are intensely destabilizing, which provides an ongoing level of chaos that allows the top elites to create evermore globalist facilities in response.
What we call the Internet Reformation has begun to thoroughly expose central banking … And yet, because it is an elite meme, it persists. Global warming, the war on terror, vaccine safety – all have been serially debunked over and over in the past ten years but each meme – and many more – continues because the elite that have proposed them and cultivated them won't let them wither away.
No matter how many times global warming is debunked – or at least manmade global warming – the political class grinds ahead, proposing carbon taxes to combat a problem that doesn't exist. Even top military men admit that Al Qaeda hardly survives, if it ever did. Nonetheless, half of Africa is afire with smoldering warfare aimed at these ghostly combatants.
And when it comes to central banking, well … it's been proven over and over that central bankers have no idea what they're doing. Ben Bernanke was confidently asserting there was no problem with home mortages right before the subprime mortgage bust of 2007 set off a worldwide crisis.
They are always wrong – and always the solution is to give them more power and more … latitude. That's what is happening now, in fact. Since central bankers have not been able to right the ship that they themselves capsized, we need to help them right it and then give them a still-larger boat with yet more powerful screws.
Thanks to Bloomberg for explaining this. We didn't realize the reaction to criticism that central bankers were rash and their strategic destabilizing would result in a worldwide movement of even MORE activist bankers.
The doors are rotating worldwide. Carney's transfer creates a vacancy in Ottawa, and Glenn Stevens's term at the Reserve Bank of Australia ends in September. Among the major emerging markets, Sergey Ignatiev retires in June as chairman of Russia's central bank, the tenure of India's Duvvuri Subbarao ends in September and China is signaling it will replace Zhou Xiaochuan as soon as next month.
Recently published research from University of California- Berkeley economists Christina D. Romer and David H. Romer supports faith in monetary policy. They conclude that the Fed made its biggest mistakes during the Depression of the 1930s and inflation of the 1970s because officials doubted their true power.
Okay, you've read it for yourselves now. A "new breed" of banker is emerging that will grasp the true power of the printing press and pump harder…
The lesson is to keep pumping and be more innovative if needed, said Danny Gabay, a director of Fathom Consulting in London. He calculates that fiscal policy, the other main lever of economic management, was eased 15 times in Japan since 1997, to little avail. "What we have now is a monetary problem, so it's time for a monetary solution," said Gabay, a former Bank of England official. "It's tough to make monetary policy effective, but it's the only way."
Yet it simply must be admitted that central bankers don't ever know how much money is too much. There are no tools that exist that can divine the future. If new and bolder central bankers are going to print even MORE money, the booms and busts shall be correspondingly larger.
This would seem to be an illogical solution, but in truth, not so. The power elite seeks these tremendous societal distortions and terrible busts. These provide the opportunity for radical change and the implementation of yet more globalist policies. Chaos advances a new order.
Enter Bernanke, Draghi, Carney and Abe, the four horsemen of the financial apocalypse.