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Gemma Rose

It's official - Central bankers have lost the plot.

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http://www.telegraph.co.uk/news/2016/10/17/central-bankers-have-collectively-lost-the-plot-they-must-raise/.                                        Okay  this might be old news to us but nevertheless it's nice to see  this in a mainstream newspaper and by a ( putting your own party politics aside )  pretty levelheaded, straight talking ,well known politician .  Really like the way he  clearly lists the 10 serious drawbacks of  current policies in simple  easy to understand terms.

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Very interesting article. Make the point that interest rates ARE a political issue and suggests central bankers are no longer the people to set them

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1 minute ago, Si1 said:

Very interesting article. Make the point that interest rates ARE a political issue and suggests central bankers are no longer the people to set them

Seems to me someone somewhere is preparing the ground for rates to be raised....

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10 minutes ago, TheCountOfNowhere said:

Seems to me someone somewhere is preparing the ground for rates to be raised....

And/Or Carney's remit to be changed.

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Why is the OP written in click bait speak? Who is this politician, and what are these 10 points?

Number 8 will shock you. etc.

Edited by SpectrumFX

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Here's a short version of those 10 reasons:

1. Drives savers to create asset bubbles

2. Asset bubbles fuel inequality

3. Pension funds are more expensive

4. Damages business model of banks

5. More saving required to get interest lowers spending

6. Share buybacks are more profitable than investment

7. CB corporate bond purchases are risky and unequal

8. Zombie companies survive on cheap, borrowed money

9. Increasing risk of stock market and housing crash

10. 10 years of emergency measures undermines confidence 

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2 hours ago, SpectrumFX said:

Why is the OP written in click bait speak? Who is this politician, and what are these 10 points?

Number 8 will shock you. etc.

"You won't believe William Hague's net worth"...

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^ telegraph link

 

Quote

 

It was May 6 1997, and the forlorn Tory survivors of Labour’s landslide election victory five days earlier had to make our first collective decision. On that day, the new Chancellor, Gordon Brown, announced that henceforth the Bank of England would have operational independence from governments. 

Eight years after the global financial crisis. central banks are still pursuing emergency policies that are becoming steadily more unpopular and counter-productive

We decided not to demur. In private, we had considered doing the same thing ourselves. The idea that central banks should be free of political pressures and the electoral cycle as they set interest rateshad become a prevailing one across the world – with good reason after the many wild swings in inflation and interest rates over previous decades. 

 

They didn't demur because it was in the pipeline with the Conservatives as well.  Under the Conservatives the BoE had had a trial run on setting interest rates "independently" since the early 90s. 

In that period the BoE had seemed to be reasonably successful so on taking power in 1997 NuLabour gave the BoE the job - NuLabour in their then role as Conservative lite.  It's only since then (1997) that the BoE has proved to be completely inept (except to line their own pockets) and helped to contribute to the economic collapse and the lack of recovery with things so bad that they're still cutting interest rates and printing money nearly a decade on.

They're still cutting interest rates that are already the lowest since at least neolithic times.

History chimes and so far as Carney and the BoE are concerned it currently chimes with neolithic times - several thousands of years ago.

Edited by billybong

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The line:

' In 2008 the central banks reacted to a massive crisis they had completely failed to foresee by cutting rates to record lows and embarking on “quantitative easing” '

 

Should read:

"In 2008 the central banks reacted to a massive crisis they had caused by cutting rates to record lows and embarking on “quantitative easing”

Any form of polictal oversight would have flagged a problem wt the likes of RBS massively increasing their balance sheet.

Central bankers thought they were safe as central bankers knew what they were doing and were dead smart.

 

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^ telegraph link

 

Quote

I am not an economist but I have come to the conclusion that central banks collectively have now indeed lost the plot. The whole point of their independence was that they could be brave enough to make people confront reality. Yet in reality they are blowing up a bubble of make-believe money to avoid immediate pain, except for penalising the poor and the prudent.

Precisely.  

They were supposed to be independent and to be able to act responsibly.  

However since officially getting the job they've consistently taken the easy way out in order to line their own pockets.

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7 minutes ago, spyguy said:

The line:

' In 2008 the central banks reacted to a massive crisis they had completely failed to foresee by cutting rates to record lows and embarking on “quantitative easing” '

 

Should read:

"In 2008 the central banks reacted to a massive crisis they had caused by cutting rates to record lows and embarking on “quantitative easing”

Any form of polictal oversight would have flagged a problem wt the likes of RBS massively increasing their balance sheet.

Central bankers thought they were safe as central bankers knew what they were doing and were dead smart.

 

+1

If fairly recent statements by Mervyn King are anything to go by (I know :rolleyes:) then the word "deliberately" should also be added.  

Then it would read "massive crisis they had caused deliberately".

Edited by billybong

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^ telegraph link

Quote

 

Earlier this year I put this view to the top staff at the central bank of a major Far East economy, thinking they might set my mind at rest and explain why everything made sense. But, far more alarmingly, they said they agreed with me: their problem was that no single authority can opt out of these policies because they might cause a recession for their own country unless there was a global, co-ordinated move gently to raise interest rates. 

The policies of any one central bank may well be perfectly rational, including the recent decisions of the Bank of England after the referendum. But so is a decision by any one sheep to run with the flock when in danger. The trouble is that the whole flock might be heading for a cliff. 

 

The idea that there isn't already a significant level of coordination of central banker action around the world is too much of a stretch to believe.  All the main central bankers are members and directors (or have representatives) of the big groupings like the IMF, the World Bank, the BIS etc etc.

They have created a self reinforcing downward spiral, a vicious circle, apparently deliberately with the added motivation that it greatly enriches themselves and their cronies.

For sure it won't be the central banking "flock" that suffers the disaster - they've already made that absolutely clear through their self serving policies.

 

 

Quote

 

The BIS Board of Directors

Chairman: Jens Weidmann, Frankfurt am Main

Mark Carney, London
Agustín Carstens, Mexico City
Luc Coene, Brussels
Jon Cunliffe, London
Mario Draghi, Frankfurt am Main
William C Dudley, New York
Ilan Goldfajn, Brasília
Stefan Ingves, Stockholm
Thomas Jordan, Zurich
Klaas Knot, Amsterdam
Haruhiko Kuroda, Tokyo
Anne Le Lorier, Paris
Fabio Panetta, Rome
Urijt R Patel, Mumbai
Stephen S Poloz, Ottawa
Jan Smets, Brussels
François Villeroy de Galhau, Paris
Ignazio Visco, Rome
Janet L Yellen, Washington
Zhou Xiaochuan, Beijing 

 

 

Edited by billybong

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The BIS Board of Directors

Chairman: Jens Weidmann, Frankfurt am Main

Mark Carney, London
Agustín Carstens, Mexico City
Luc Coene, Brussels
Jon Cunliffe, London
Mario Draghi, Frankfurt am Main
William C Dudley, New York
Ilan Goldfajn, Brasília
Stefan Ingves, Stockholm
Thomas Jordan, Zurich
Klaas Knot, Amsterdam
Haruhiko Kuroda, Tokyo
Anne Le Lorier, Paris
Fabio Panetta, Rome
Urijt R Patel, Mumbai
Stephen S Poloz, Ottawa
Jan Smets, Brussels
François Villeroy de Galhau, Paris
Ignazio Visco, Rome
Janet L Yellen, Washington
Zhou Xiaochuan, Beijing 

 

No Russians allowed?

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11 hours ago, Errol said:

The BIS Board of Directors

Chairman: Jens Weidmann, Frankfurt am Main

Mark Carney, London
Agustín Carstens, Mexico City
Luc Coene, Brussels
Jon Cunliffe, London
Mario Draghi, Frankfurt am Main
William C Dudley, New York
Ilan Goldfajn, Brasília
Stefan Ingves, Stockholm
Thomas Jordan, Zurich
Klaas Knot, Amsterdam
Haruhiko Kuroda, Tokyo
Anne Le Lorier, Paris
Fabio Panetta, Rome
Urijt R Patel, Mumbai
Stephen S Poloz, Ottawa
Jan Smets, Brussels
François Villeroy de Galhau, Paris
Ignazio Visco, Rome
Janet L Yellen, Washington
Zhou Xiaochuan, Beijing 

 

No Russians allowed?

In the past the UK and US presence might have sufficed at director level.  The ownership information is surprising but I assume it's correct.  

The Central Bank of Russia appears to be a member of BIS but its chairwoman is not a director. 

Quote

 

http://new.euro-med.dk/20141215-putins-confident-putin-to-nationalize-rothschilds-central-bank-and-purge-collaborators-with-west-war-till-one-side-collapses-inevitable.php

Under the Constitution, the CBR belongs to a foreign State –  the City of London – and is taking orders from London and Washington.

 

 

Quote

(The links about the Central Bank of Russia are posted for the ownership information and not for the other content in the links)

Apart from that from Wikipedia it appears to carry out what might seem to be a normal central bank role within Russia.

Quote

https://en.wikipedia.org/wiki/Central_Bank_of_Russia

The Central Bank of Russia is a member of the BIS.

 

Edited by billybong

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The problem here is that you have to change economic policy every so often in order to prevent huge bubbles blowing in various investment classes.

If you continue any one policy too long, that's going to lead to massive bubbles and an almighty crash when the policy is changed. Or an almightly crash further on at some point in the future when pursuing an inappropriate policy leads to its devastating conclusion.

You can see the point from a central bankers/politicians perspective. It's really a no brainer. Either carry on with the same old stuff and hope the major crash doesn't happen on your watch, or instigate the crash by a change of policy. It's kind of obvious which one they are going to do.

Most politicians/technocrats are looking for their perfect get out. Cameron/Osbourne got theirs, even though it might have come a bit early for them. Carney is now looking for his IMO.

Amazing how people like King, Osbourne, Haig, Greenspan etc suddenly "discover" the right thing to do once they leave power, but seem to be unable to enact it once they are in power. Or maybe not so amazing when you realise they are humans too, and its the system that is failing us, not the people in charge.

 

 

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Another exercise in blame-shifting rather than responsibility-taking. Hague expects us to believe that the last six years have had nothing to with George Osborne and the Tory Party's house economists!

Let me suggest an alternative explanation: Having spent years talking up a bogus recovery, the Establishment is acutely aware that the shit is about to hit the fan again, hence all sides are furiously rehearsing their excuses in public ahead of the event.

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^ telegraph link

Quote

When pension funds renege on promises, or inequality widens further, or savers become desperate, huge public and political anger is gong to burst over the heads of the world’s central banks. 

Those things have happened already (pension funds reneging on promises, inequality widening etc etc etc etc).  The huge public and political anger as a consequence is part of the reason for events like the vote to leave the eu and the emergence of parties like UKIP and the SNP.  The BoE's self serving activities will no doubt have it's consequences for the BoE in due course - to start with Carney should be sacked.

Edited by billybong

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just another politico who has "seen the light" the minute they realise any possibility of a future political career lies dead in the gutter.

"14 Pints" only has the lecture circuit as a wise old statesman left to him now so is positioning accordingly.

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4 hours ago, TheCountOfNowhere said:

Seems to me someone somewhere is preparing the ground for rates to be raised....

They are preparing us for an inflation hike, don't say we didn't warn you......what comes next? ;)

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4. Damages business model of banks

Don't agree with that, but the rest is very surprising from a politico who was apparently an economic illiterate when he was in office, just like all the rest of them. It proves again what whores they are , they will bark anything if the price is right. 

The fractional reserve model, especially when velocity has collapsed like it has, requires that ever more bank loans are created to pay the interest on previous loans(only principle is lent) , and a higher rate is not going to help them. Destruction of the banks' loan books through debtor defaults with rising rates won't help them. It also won't help the over-leveraged mortgage holder(which is practically all of them). Almost all the private wealth of this nation is in houses. We are so far gone to the end of the rates scale, Check Mate is the proper term , I think.

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