Central Banks




You Can’t Keep the Printing Press Idle for too Long …

We have recently portrayed Canada’s new central bank governor Stephen Poloz, to whom we have alternately referred to as a comedian and a delusional bubble blower. This may perhaps strike some readers as uncharitable; then again, central economic planning bureaucrats should be fair game, especially as nearly all of them are slaves to hoary inflationism and are apodictically certain to do grave damage to the economy, based on economic theories that at best deserve to be called a form of voodoo. It’s really that bad.


0715polozMr. Stephen Poloz, Canada’s new bubble-blower in chief, gazing into the distance – presumably in a futile attempt to divine the future.

 Photo credit: Adrian Wyld / The Canadian Press


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“The Man” is Playing with Fire 



Photo credit: Keystone

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Regime Change Option on the Table?

It has been clear from the beginning that Greece and its creditors were in a “Mexican standoff” situation. We already pointed this out shortly before Syriza won the election (see: Grexitology: A Mexican Standoff). 1. the “institutions” (formerly known as the “troika”) couldn’t possibly let Greece go, but could also not possibly give in and climb down from their demands and 2. Mr. Tsipras was in essentially the same situation; he couldn’t cross Syriza’s aptly named “red lines”, but defaulting and leaving the euro zone is likewise not palatable to him.


road closed

Moving too far to the left is unlikely to end well

Cartoon by Lisa Benson


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Poor, Forlorn, and Neglected

Neither stocks nor gold moved much on Tuesday… “Wait and see,” remains the order of the day. The Greeks, for example, have 48 hours to come to terms with their creditors. We wait to see what will happen.

We wait to see what happens in the bond market, too. Have bonds topped out? Hard to say …   For six years the Fed and other major central banks have made a bad situation worse.

By promising to keep the cost of carrying debt ultra-low, they have encouraged governments and businesses to add trillions of dollars in debt to an already debt-drenched economy.


abeShinzo Abe, armed with his three arrows. He has so far managed to pump up the stock market and stomp on the currency, but he the third arrow has yet to find a worthy target.

Image via The Economist


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J.C. Juncker Sets Out to “Wake Up Liquidity”

In a recent article on the never-ending Greek Kabuki theater, we have come across parts of an interview EU budget commissioner Kristalina Georgieva has given to AFP, in which she explains J.C. Juncker’s cunning plans to “kick-start” the European economy by pumping €300 billion he doesn’t have into infrastructure projects and other assorted white elephants (we have previously discussed this Stalinesque plan, as well as what usually happens when even some of the “best stewards of EU funding” are “investing in in infrastructure” – see The EU’s Ghost Airports for the ghastly details). The interview contained the following gem:


“The Juncker plan is to wake up the liquidity sleeping in our financial system, to give courage to our money, to pump investment into the real economy,” Georgieva said.


The always open spigot, spitting out what is apparently valiumed money.


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Federal Open Yawn Committee puts Kremlinologists all over the World to Sleep …

The Fed’s monetary policy statement delivered on Wednesday was the non-surprise/yawn-inducer of the year. Readers can take a look at the trusty WSJ statement tracker, which reveals that apart from a few minor and unimportant changes, the statement was basically a carbon copy of the last one.

Not a single dissent mars this bland exercise in bureaucratese, so there isn’t even anything to report on that front. If you have trouble sleeping, reading this statement might be a very good alternative to Valium.

So did anything noteworthy happen? Well, yes. Apparently market participants believe they have to react to the forecasts of a bunch of bureaucrats who are quite likely among the worst economic forecasters in the world – and that’s really saying something.

 augursAugurs in ancient Rome, observing the behavior of hens.


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The Man They Hate with a Passion

Euro area politicians and IMF bureaucrats really hate Yanis Varoufakis’ guts with a passion. The media are full with denunciations of the man as “unprofessional”, negotiators of the euro-group let it be known (anonymously, natch) that “it got to the point where eyes roll”, that they were “sick and tired of being lectured about austerity and the effects of the crisis”, in short, it was “impossible to do business with him”.

Why do they hate him so much? Allegedly, “any sympathy for Greece was eroded by his failure to draft concrete proposals.” Typical Mediterranean lazy bum is the message, in other words. Big on vacuous emoting, but doesn’t want to waste time on doing his homework (plus, he wears no tie … you have to be clad in the technocratic uniform if you want to be taken seriously).


varoubikeThe eurocrats really hate this one. They’re probably all trying to channel Tony G when they meet Varoufakis.

Photo credit: Alkis Konstantinidis / Reuters


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Making Waves

Mainstream economists tell us that the Federal Reserve protects us from economic waves, indeed from the business cycle itself. In their view, people naturally tend to go overboard and cause wild swings in both directions. Thus, we need an economic central planner to alternatively stimulate us and then take away the punch bowl.


Fed_ReserveNewspapers report on the adoption of the Federal Reserve Act. It was erroneously held that it was going to be “a constructive Act to aid business”. Ominously, even more such acts were promised.


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US Rate Hike: The Back-Pedaling Brigade

Last week’s payrolls report was “stronger than expected”, which should actually be fairly meaningless, given how many times it will be revised and considering that it is a lagging economic indicator. However, in light of the Fed’s absurd employment mandate, it does slightly increase the chances of a token rate hike at some point this year.


Christine-Lagarde-EU-IMFIMF chief Lagarde – a political operator and bureaucrat since 2005, thinks monetary policy should remain as loose as possible. No-one seems to really know why.

Photo credit: Reuters


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GDP Contracts in Q1, but “Everything is Fine” Anyway?

Not surprisingly, Q1 GDP growth data have been revised lower into contraction territory. However, everybody “knows” that this was just a temporary weather-related stumble and there will be a magical second half. This “second half” hopery has been with us for years now. Alas, the strong recovery has never arrived – instead, the economy is at best muddling through, in what has so far been the weakest recovery of the entire post WW2 era.

Readers of this blog probably know why this is so. The Fed and the commercial banking system have increased the true US money supply by well over 100% since 2008. Monetary pumping can create a temporary illusion of economic strength by misdirecting scarce resources into what would otherwise be loss-making activities. In so doing, it severely undermines the economy on a structural level. If the economy’s pool of real funding is already in trouble – and we would argue that this is definitely the case in the US economy after one credit bubble too many – then money printing cannot even conjure up an illusion of economic strength anymore.



Image via Newsday


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