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Central Bankers Are Magic People

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http://www.bloomberg.com/news/articles/2016-05-11/ecb-can-still-pull-rabbits-out-of-the-hat-council-member-says

The European Central Bank can still conjure up policy surprises if needed to combat economic shocks and restore euro-area inflation, Governing Council member Vitas Vasiliauskas said.

“Markets say the ECB is done, their box is empty,” Vasiliauskas, who heads Lithuania’s central bank, said in an interview on Tuesday in Vilnius. “But we are magic people. Each time we take something and give to the markets -- a rabbit out of the hat.”

Under President Mario Draghi, the ECB has shown a willingness to take policy into unprecedented areas including negative interest rates, ultra-cheap long-term bank loans and a quantitative-easing program that has been both extended and expanded. Yet while the 19-nation economy has returned to growth, inflation remains absent and new risks such as a Chinese slowdown and the U.K.’s vote next month on whether to leave the European Union still have the potential to damage the recovery.

The 42-year-old Vasiliauskas, who was appointed to a second term on April 7, declined to comment on specific policy options, but refuted the notion that the central bank wouldn’t be able to react to shocks such as a sudden worsening in the international economy.

Market Surprises

“Such conversations, such speculations are taking place before every meeting,” he said. “We still have a lot of tools and we can make surprises for the market. I don’t see for the moment any need for a new rabbit because we should implement what was agreed, what was announced.”

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On the basis that they saw none of the problems coming last time round (after having stirred up the debt pot) I bet they have not one clue as to the true scale of what they have taken and whom they have taken it from, and they obviously care even less than that.

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We are in safe hands. We have iPads Facebook and a roof over our head (OK for some it might be cardboard). The banksters know what they are doing. Skimming off the cream.

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Central bankers are magic thinkers alright. Their Neoclassical/New Keynesian ideology violates both the second law of thermodynamics and the Church-Turing theory of computability.

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...singled out a second round of targeted long-term loans to banks as the most powerful addition to the ECB’s palette. The so-called TLTRO-II potentially offers to pay lenders to take central bank cash, the idea being that they pass it on to companies and households as loans. The first operation is scheduled for June 24. “This measure, personally for me, is very sexy,” Vasiliauskas said. “It can make direct impact on the real economy.”

They want things to cost more. Protect the hpi, makes things more expensive. Our CB magicians and their tools to defeat markets.

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