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Central Bankers Lurch From 'whatever It Takes' To 'whatever Next'

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The Swiss currency shock has raised an awkward question many investors have been fearful of asking - what if central banks become as unpredictable and fallible as they are powerful?

The Swiss National Bank's sudden decision to abandon its three-year-old cap on the franc - the "cornerstone" of its monetary policy just three days before - led to the biggest one-day move in major exchange rates in the post-1973 floating rates era. To some it was a warning sign of other U-turns, mishaps and possible failures by central banks still ahead, outcomes not fully appreciated by long-becalmed markets.

For decades the power of currency printing presses has held markets in thrall. "Don't fight the Fed" and all its international variations has been a devout belief among financial traders.

Even after the failure of Alan Greenspan's Federal Reserve to spot and headoff one of the biggest credit booms and busts in history, the ability of the Fed, Bank of England, Bank of Japan, European Central Bank and others to flood their money supply to ease the fallout helped anaesthetise fractious markets.

The subsequent waves of cheap credit, currency fixes and "quantitative easing" drove down borrowing rates and erased volatility.

Hilarious, central banks merely have the illusion they are in control, events in 2007-08 demonstrated clearly how clueless they are and the fact that it's growth at all costs. However it's not sustainable to have perpetual growth at some point you will have to have a contraction.

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their power comes, of course, from creating money. when that money gets worthless, so does their power.

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Ultimately it's about them being in control and their own self interest and that's clearly evidenced by their battle against cheaper prices.

Through their incompetence and economic delusion they can't know, predict or control the outcomes of their policies but their responses to the repeatedly bad outcomes are again about self interest.

Edited by billybong

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Like you cannot get rid of complexity; you can only hide it.

They cannot get rid of risk; they can only transfer it elsewhere.


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  • 407 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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