'Central banks in Japan, the U.S. and Europe tried multiple rounds of QE. That none of these programs were any more successful than their predecessors also points to empirical evidenced failure..'

'It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.'

- Adam Smith (Source)



'..like in 2008-2009, is a symptom and harbinger of broader economic problems..'

'Commodity prices are particularly important, because commodities are consumed in the here and now. When demand declines, consumption declines, and prices decline contemporaneously. For all the talk about financialization, that can’t overcome the decisions of billions of commodity consumers around the world. Thus, at present, the high positive correlation between commodity prices and asset prices, like in 2008-2009, is a symptom and harbinger of broader economic problems. You don’t need Rube Krugman contraptions to explain that.'

- Streetwise Professor, Rube Krugman Argues From a Price Change, With Predictably Absurd Results, January 20, 2016



'Negative interest rates would have the same non-productive characteristics as QE and forward guidance.'

'The study “Persistent Overoptimism About Economic Growth” by Kevin J. Lansing and Benjamin Pyle and published in the Federal Reserve Bank of San Francisco Economic Letter of February 2, 2015 systematically examined the Fed’s forecasting record. Specifically, Lansing and Pyle examined the real GDP projections made four times per year by the Fed that began in November 2007. Their overall conclusion reads: “Since 2007, Federal Open Market Committee participants have been persistently too optimistic about future U.S. economic growth. Real GDP growth forecasts have typically started high, but then are revised down over time as the incoming data continue to disappoint.” Even Mrs. Yellen in her December press conference admitted the Fed’s models were not working.

Central banks in Japan, the U.S. and Europe tried multiple rounds of QE. That none of these programs were any more successful than their predecessors also points to empirical evidenced failure. The pattern is shown in year-over-year growth in U.S. nominal GDP (Chart 4). Three weak transitory mini growth spurts all reversed, and the best rate of growth in the current expansion was weaker than the peak levels in all of the post 1948 expansions.

Several academicians have found that the data does not validate the efficacy of QE and forward guidance. In a paper presented at the Fed’s 2013 Jackson Hole Conference, Robert Hall of Stanford University and Chair of the National Bureau of Economic Research Cycle Dating Committee wrote “an expansion of reserves contracts the economy.”

Negative interest rates would have the same non-productive characteristics as QE and forward guidance.


A Causal Mechanism Explaining the Counter-Productiveness of QE and Forward Guidance

This empirical data notwithstanding, a causal explanation of why QE and forward guidance should have had negative consequences was lacking. This void has now been addressed by “Where Did the Growth Go?” by Michael Spence (2001 recipient of the Nobel Prize in economics) and Kevin M. Warsh (former Governor of the Federal Reserve), a chapter in a new book Growing Global: Lessons for the New Enterprise, published in November 2015 by The Center for Global Enterprise.

The Spence and Warsh point is that the “the post-crisis policy response” contributed to and helps to explain the slower economic growth during the past several years. Their line of reasoning is that the adverse impact of monetary policy on economic growth resulted from the impact on business investment in plant and equipment. Here is their causal argument: “...QE is unlike the normal conduct of monetary policy. It appears to be qualitatively and quantitatively different. In our judgment, QE may well redirect flows from the real economy to financial assets differently than the normal conduct of monetary policy.” In particular, they state: “We believe the novel, long-term use of extraordinary monetary policy systematically biases decision-makers toward financial assets and away from real assets.” '

- Hoisington Quarterly Review and Outlook – 4Q2015, January 20, 2016



Context Don't Tell Me That The Socialist Calculation Debate Isn't Still Relevant? January 20, 2016 - Entrepreneurship - '..the calculation problem is much more general than has usually been realized.' - Dr. Peter G. Klein

'Academic research indicates that QE in the US contracted rather than expanded economic activity..'

'..A tightening of financial conditions portends Credit problems way beyond energy and mining..'

'..central bankers have blown the biggest equity and junk bond market bubbles in history..'


(Global Credit) - Symptoms of Too Much Debt

Fears of global liquidity crunch haunt Davos elites, January 20, 2016

The blue ribbon award for ridiculous comment of the day goes to Ben Bernanke who dismissed China's $28 trillion debt pile as an "internal problem" only. January 20, 2016


Mexico Central Bank Warns of "Potentially Severe Shock" Caused by Credit Crunch, Seeks Emerging Market "Buyer of Last Resort" January 19, 2016

Italian Banks Hammered; Bad Loans Hit €201 Billion; End of Draghi PUT; Get Out Now! January 19, 2016

Three Centuries of Boom-Bust in Spain, January 21, 2016


First Ever Debit Card Backed by Gold in Real Time

Why We Need a Recession, January 20, 2016

Nobel scientist tells us we can live to 150, January 20, 2016


'..the theorem of the economic impossibility of socialism .. is fully applicable to central banks..' - Jesús Huerta de Soto