<blockquote>'My view that “QE has failed” has seemed extreme – even outrageous to conventional analysts. Yet Japan is the epicenter of the Bernanke doctrine of radical experimental inflationism. Unshakable central banker “shock and awe” and “whatever it takes” were supposed to alter inflationary expectations throughout the economy, boosting asset prices, investment, incomes, spending and – importantly – the general price level. Deflation, it was argued, was self-imposed.
It may have worked brilliantly in theory – it’s just not looking so bright in practice. An impervious Japanese CPI has continued to decline, while the central bank has pushed bond prices to ridiculous extremes by purchasing a third of outstanding government debt. Major risks associated with an out-of-control central bank balance sheet and asset Bubbles are not inconspicuous in Japan. There is today heightened pressure in Japanese policy circles to wind down this experiment before it’s too late. It will not go smoothly.
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October 25 – Reuters (Gernot Heller): “There is a growing international consensus that monetary policy has reached the limits of its possibilities, German Finance Wolfgang Schaeuble told a group of government officials in Berlin… Schaeuble also said that he believed that there was an excess of liquidity and excess of indebtedness internationally.”
Over recent months, German public opinion has turned even more against QE. ECB President Jens Weidmann has been opposed to QE from day one, and his skepticism has been shared by fellow German (ECB executive board member) Sabine Lautenschläger. A majority of Germans believe QE is hurting Deutsche Bank and the German banking system more generally. And there is growing frustration that the ECB is a mechanism for redistributing German wealth. The stakes for dismissing German concerns are growing.
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Abnormal has been around so long now we’ve grown accustomed. Fifteen-year mortgage rates at 2.78%. ARMs available at 2.75%. And I’m hearing automobile advertisements even more outrageous than 2007. “Lease Kia two for $222 a month.” How much future demand has been pulled forward by history’s lowest interest rates – and accompanying loose Credit.
QE is not disappearing any day soon. Yet there’s a decent argument that we’re at Peak Monetary Stimulus. The Fed is preparing for a hike in December. The Kuroda BOJ has lost its appetite for surprising markets with added stimulus. And I suspect the ECB is just over a month away from a contentious discussion of how to taper QE starting in March 2017. Market liquidity may not be a pressing concern today, but it will be in the not too distant future.'
- Doug Noland,
Peak Monetary Stimulus, October 29, 2016</blockquote>
Context<Blockquote>
'..economic growth cannot be conjured into being by top-down interventionism in the form of monetary pumping and deficit spending..'Weimar malaise - '..Monetary policymakers are urging more extreme actions in their frantic pursuit of higher inflation. They should be careful what they wish for.''..When it comes to understanding the nature and destructive capacities of inflation, the “Austrians” put the “Keynesians” to shame.''Countries suffering from .. “too much finance” .. use their financial resources less efficiently..''..The problem lies with unfettered finance and monetary mismanagement..''..the Federal Reserve has completely failed to recognize .. a flawed monetary policy framework..''..saving, wise investment and production are what creates wealth, not spending and consumption..'</blockquote>