BIS and IMF attacks on quantitative easing deeply misguided warn monetarists … Monetarists across the world have warned that the International Monetary Fund and the Bank for International Settlements are making an historic error by calling for a withdrawal of emergency stimulus before the global economy has fully recovered. The BIS warned against "ever more monetary policy activism" to keep the global economy afloat. It called on the US, Britain, Japan, and the eurozone, to restore interest rates to normal levels "sooner rather than later." – UK Telegraph
Dominant Social Theme: We know what we're doing but we're just having a little argument.
Free-Market Analysis: Is this more evidence that monetary policy is merely made up as it goes along? Now we have the spectacle of three of the largest central banks in the world expanding money printing while two of the largest monetary-policy institutions attack those same programs.
What can we make of this? What is stranger is that the BIS is the policy arm of the central banking community and certainly has some oversight. The IMF, too, may be seen as a coordinating body with considerable monetary power. The bosses, in other words, are jawboning their employees.
What a mess. Here's more:
The two watchdogs launched broadsides against central bank largess last week. The BIS — the forum of central banks — was particularly blunt, seeming to imply that quantitative easing "does not work".
Critics say this risks undermining the credibility of radical measures when more may yet be needed. They fear central banks could repeat the mistake made in 1937 when the Federal Reserve lost its nerve and tightened too soon, tipping America back into depression.
"The BIS and the IMF are deeply misguided and risk doing the world a grave disservice. The biggest threat right now is irrational fear of bubbles among central banks," said Lars Christensen, a monetary theorist at Danske Bank. "How can they criticize the Bank of Japan for pulling the country out of 15 years of deflation and the longest asset price collapse in modern history?"
Mr Christensen said deflationary forces are stalking the global economy, making it essential to offset budget cuts with monetary stimulus. The US is tightening fiscal policy by 2pc of GDP this year, the most in half a century. Columbia Professor Michael Woodford, America's leading monetarist, told a London forum recently that the global authorities must not repeat the mistake made by the Bank of Japan when it drained money too fast, thinking the economy was safely out of the woods. "All this talk of exit strategies is deeply negative," he said.
Yes, it's negative but not for the reasons stated. What this shows us once again is how nonsensical monetary policy really is. In truth no one knows how much money printing is too much or when to stop.
One can only know that whatever is decided is probably wrong. History shows us that. The idea that bankers can fix the value and price of money on a daily basis instead of allowing the Invisible Hand to do its work is perhaps the single greatest tragedy of our age.
People will look back on this mass delusion and wonder how it took root in societies that considered themselves "enlightened," and "modern."
And so … the Telegraph gets this one wrong. The problem is not one of figuring out when to shut down easing; the problem is that people BELIEVE they can figure it out to begin with.
No matter what window is selected, it will not be correct. If central bankers actually stiffen rates and drain money, there likely will be a collapse of some sort. If central bankers continue to print torrents of new money there will be a euphoria followed by an even greater collapse.
Perhaps this is the point. Perhaps the idea is merely to create ever-more chaos and confusion. Or perhaps those running the show really don't have any idea what they're doing and in the eleventh hour are revealing their desperation.
The cure is out there, though.
This disease of money printing can only be rectified by the reaffirmation of free-markets and the implementation of monetary competition. One hundred years of central banking proves that price-fixing doesn't work and its legacy is misery, poverty and depression.
Competition, free banking and free-market money are the solution to the mess the bankers have made and insist on continuing to make.