John Roughan: Central bankers have the world's big economies in a hole
5:00 AM Saturday Aug 27, 2016
Flooding a crisis with cash may avoid the immediate consequences but it doesn't restore an economy to robust health, and it doesn't cure the cause of the crisis.
This weekend in a little place called Jackson Hole, Wyoming, US, central bankers of the world are gathering for their annual contemplative retreat on the craft of monetarism and the state of the global economy. Deeply contemplative it may be, but it is too much to hope they will emerge from the Hole with a decision to stop digging.
For the best part of eight years since the global financial crisis they have been trying to produce sustainable growth with inflationary tools. They took their base interest rates as low as they could and when that didn't work, some took the rates below zero, effectively a charge for savings. When that didn't work, they started increasing the quantity of money in their economies. "Quantitative easing" hasn't worked either.
Lowering the cost of money might have prevented the GFC turning into the Great Depression, and increasing the quantity of cash might have avoided a "double-dip" recession, but it has become a tonic for every crisis.
When Europe was struggling with the euro its central bank promised to "do whatever it takes". The morning after Brexit the governor of the Bank of England spoke resolutely from a rostrum resembling a papal window.
Flooding a crisis with cash may avoid the immediate consequences but it doesn't restore an economy to robust health, and it doesn't cure the cause of the crisis. It makes it worse. Cheap loans in the United States, made worse by financial markets' confidence the Fed would underwrite anything they did, created the sub-prime mortgage bubble that led to the GFC. Despite closer supervision of bank lending since then, house prices have been rising faster than before.
Meanwhile, the US economy takes fright every time the Fed tries to raise interest rates and the European Union and Japan are still flatlining on the life support of quantitative easing.
Reviewing the state of the world in a speech this week, New Zealand's Reserve Bank Governor, Graeme Wheeler, said, "Global economic growth remains significantly below its long-term average despite unprecedented monetary accommodation." The volume of global merchandise trade had "drifted lower since the start of 2015" while "trade restrictions in G20 countries have been rising steadily and many governments are concerned about the strength of their exchange rates".
Wheeler is not at Jackson Hole this weekend, having sent Deputy Governor Grant Spencer in his place, but in that speech he listed the questions central banks are grappling with. One of them was: "Has monetary policy reached the limits of its effectiveness in central banks with negative policy rates and large programmes of quantitative easing?"
New Zealand and Australia, fortunately, have not touched these drugs. But we are suffering from the damage they are doing in house prices. Last week, for the second month in succession, the Reserve Bank lowered its base interest rate despite continuing strong growth, low inflation and rampant property prices. All these, especially the last, argued for a rise in interest rates but Wheeler has to avoid getting out of step with interest rates in other countries because that would push the dollar higher and hurt exporters.
Something interesting is happening here, though. Last month, and again last week, our trading banks have been reluctant to pass on the full cut to the official cash rate in their mortgage lending rates. It is as though the trading bankers have taken over the task of managing our monetary settings, aware that the Reserve Bank is obliged by conventional practice and its inflation target to follow this pointless international stimulus.
It is pointless because people know it is artificial. Monetary stimulants have not worked for the same reason Keynesian fiscal stimulants failed to work in the 1970s, and arguably didn't work in the 1930s either. If the GFC was 1929 we are now in 1937, when there was still fear of slipping back into recession and democracies were susceptible to bullies and demagogues who cast themselves as personally and uniquely strong by demonising minorities.
The stimulants don't generate sustained growth because business and personal investors are rational. They have not responded to low interest rates by investing in production and expansion, they have put their money into buying, or buying back, shares or into real estate. Rationally, they know monetary and fiscal life supports have to be withdrawn sooner or later, and that at some point central banks will need to start containing the inflation triggered by their excess money supply.
Since its adoption in the 1980s, monetarism has proven successful at combating inflation in growing economies, but recent experience has shown it is not capable of rekindling growth. Bankers might do better to take economies off the drip, turn their full attention to house prices, raise interest rates and convince business and investors they are about to see reality return.
1-800#'s and Instructions for Currency Redemption/Exchange
Guest Posting Now Available
Divine Creator, father, mother, son as one...If I, my family, relatives, and ancestors have offended you, your family, relatives and ancestors in thoughts, words, deeds and actions from the beginning of our creation to the present, we ask your forgiveness...Let this cleanse, purify, re-lease, cut all the negative memories, blocks, energies and vibrations and transmute these unwanted energies to pure light....And it is done.
Repeat during 15 minutes, visualizing the RV already manifested in our reality and all humanity rejoicing in peace and abundance:
I’m sorry! Please forgive! I love you! Thank you!
Sit quietly with eyes closed and feet flat on the floor. Take three long slow cleansing breathes, inhale through the nose, exhale slowly through perched lips. Postulate securing your grounding cord from your first Chakra and the bottom of each foot all the way down into the center of the Earth. Postulate your cord from your crown Chakra traveling all the way up into the cosmos to connect to Source. Slowly inhale Golden White Healing Light (Energy) from Source coming down through your Crown Chakra pushing out all dark, destructive, negative energy through your root Chakra and both feet down to the center of the Earth to be healed, renewed and recycled.
Feel this Golden White healing Light (Energy) running through your body from head to toe like blooding flowing through your veins. Now postulate every living thing on Earth grounded in this manner and running Golden White Healing Energy, add in some pink for love, cleansing and renewing the entire planet and every living thing on it.
Take a moment throughout the day to visualize this energy running and cleansing your body and the whole of the Universe. Ushering in the New Golden Age. Bringing in NESARA, GESARA, the Revaluation, disclosure, new technology and all our Galactic brothers and sisters.
Below is a list of all of the content posted for Wednesday, October 26, 2016. This will be useful for those of you who may have missed somet...
Saturday, August 27, 2016
John Roughan: Central bankers have the world's big economies in a hole
We are in compliance with, "Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use."
All rights reserved go to their respective holders. We do not own the intellectual property shown on this website, the respective holders own that privilege unless stated otherwise.