<blockquote>'In their attempts to fight routine consumer price deflation, central bankers create very destructive asset bubbles that eventually collapse, setting off what they should fear – asset bubble deflations following a buildup of bank credit on inflated assets.'
- Mike “Mish” Shedlock,
Inflation Expectations Plunge: What, Me Worry? February 10, 2016</blockquote>
<blockquote>'Economic science has clearly taken a wrong turn sometime in the 1930s – it has become utterly bereft of common sense and one often gets the impression that it has been regressing rather than progressing. The reason is of course that it is the most politicized branch of science. When physicists debate whether gravitational waves exist, the outcome of their deliberations is not going to influence the distribution of economic and political power. It is obviously different with economics, which over recent decades has mainly served to provide “scientific” fig leaves for statism and interventionism. It is high time this changed.
We have become ever more disgusted by the actions of central bankers in recent years. Their mindless activism, which is based on theories so loopy even a child should be able to refute them, endangers us all. Hence we have ever more frequently resorted to less than polite language when describing these people – they actually deserve it. We often wonder whether someone like Mr. Ingves actually believes his own BS. Can these people
really be so dense? We fear the answer is actually yes. So if Mr. Ingves insists on the lunacy of imposing negative rates to “boost inflation”, then we feel free to insist that he deserves the Upper-Class Twit of the Year Award.'
- Acting Man,
'..negative interest rates are an abomination. They could not possibly exist in a free market..' February 12, 2016</blockquote>
<blockquote>'PIMCO’s chief investment officer Scott Mather says Europe and Japan’s move to a negative interest rate policy has actually contributed to financial market volatility and tighter financial conditions, by widening risk premiums and reducing the availability of credit from a more stressed bank system. This is the opposite effect to that intended.
“Negative interest rates may be a central bank tool that is increasingly ineffective at boosting growth and inflation, and may pose more risk to the financial system than is commonly understood,” says Mather.
“It seems that financial markets increasingly view these experimental moves as desperate and consequently damaging to financial and economic stability.”
..
Consultant and former banker Satyajit Das believes central banks have run out of useful policy tools and negative rates merely allow over-indebted borrowers to maintain unsustainable levels of debt.'
- Victoria Thieberger,
Markets are losing faith in central banks, February 12, 2016</blockquote>
'..Negative rates don’t alleviate market illiquidity and they won’t bolster faltering global Bubbles. They do intensify the unfolding crisis of confidence.'<blockquote>'The bursting of the mortgage finance Bubble almost incited global financial collapse. It took concerted central bank intervention, $1.0 TN of Bernanke QE, unprecedented bailouts, zero rates and massive fiscal stimulus to hold catastrophe at bay. Massive monetary stimulus pushed fledgling EM and China Bubbles to historic ("blow-off") extremes. The Chinese instituted a $600 billion stimulus package then proceeded to completely lose control of their financial and economic Bubbles. QE, zero rates and dollar devaluation incited a spectacular Global Reflation Trade that has collapsed spectacularly. Ultra-loose finance on a global basis ensured epic over- and malinvestment throughout the energy and commodity sectors. Virtually free-“money” incited massive over-investment in manufacturing capacity, especially throughout China and Asia. In the U.S. and globally, zero rates and liquidity excess fueled crazy tech and biotech Bubbles 2.0.
..
It’s now been more than three years of absolute monetary disorder. The commodities Bubble went bust, which, in the age of over-liquefied and speculative global markets, worked to spur only greater “blow off” excess throughout global securities markets. The EM Bubble burst, which provoked only greater stimulus measures in China. Chinese reflationary policies incited precarious “blow off” stock and bond market excesses. The timid Fed’s failure to begin rate normalization spurred speculative Bubble excess throughout equities, fixed-income and derivative markets.
..
In the end, the runaway global Bubble was built chiefly upon confidence in central banking and policymaking more generally. Markets then rather abruptly lost confidence in the ability of Chinese officials to manage their faltering Bubbles. With the historic Chinese Credit and economic Bubbles at risk of imploding – and energy and commodities collapsing - faith in the capacity of global central bankers to keep the game going began to wane. The sophisticated leveraged players commenced risk reduction - and suddenly there were few buyers. Instead of more QE, central bankers have responded to “risk off” with negative interest rates. Negative rates don’t alleviate market illiquidity and they won’t bolster faltering global Bubbles. They do intensify the unfolding crisis of confidence.
..
Booming international corporate debt markets have been instrumental in fueling the global securities market boom – and the Global Credit Bubble more generally. And I would add that perceived low-risk corporate Credit has been at the (Crowded) epicenter of the central bank-induced “Moneyness of Risk Assets” phenomenon. If I’m right on the unfolding global backdrop, prospects for corporate Credit as a liquid store of value are dismal. A Crisis of Confidence in Corporate Credit would severely impact an already fragile global financial and economic backdrop.'
- Doug Noland,
The Global Bubble, February 13, 2016</blockquote>
<blockquote>'Central banks have been pumping money into the global economy without a whole lot to show for it other than sharply higher stock prices, and even that has been on the downturn for the past year.
Growth remains anemic, and worries are escalating that the U.S. and the rest of the world are on the brink of a recession, despite bargain-basement interest rates and trillions in liquidity.
It's all part of a phenomenon that Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, terms "quantitative failure," or the flip side of the quantitative easing policy the Fed and others have been employing to stimulate growth.'
- Jeff Cox,
$12.3 trillion of QE has added up to...this? February 12, 2016</blockquote>
<blockquote>'..the Chinese government has denounced predictions of any further erosion of the renminbi. The People’s Daily, the state-owned newspaper, in late January criticized George Soros, the billionaire trader known for big currency bets, after he questioned Chinese policies.
“When they came out to attack Soros, to me that was the strongest signal that they will do whatever they can not to make Soros and other hedge fund managers too rich,” said Weijian Shan, chief executive of PAG, a private equity firm based in Hong Kong that manages $15 billion.'
- Keith Bradsher,
Chinese Start to Lose Confidence in Their Currency, February 13, 2016</blockquote>
<blockquote>'Within the International Monetary Fund, which has been regularly downgrading global forecasts over the last year, economists have begun to express concern that the growth problems of large emerging markets like China, Brazil, Turkey and South Africa are going to persist for the long term.
Increasing levels of debt and the inability of governments in these countries to put in place long-lasting reforms, especially at the private sector level, will keep growth rates much lower than they should be.
That could mean that this convergence with developed economies that emerging market bulls have long predicted could face quite a long delay and perhaps, in some cases, not even materialize.
The well-known bond investor William H. Gross of Janus Capital took up this theme in his latest investment essay, arguing that there was no evidence to show that the financial wealth (and increased levels of debt) created by a long period of extra-low interest rates would spur growth in the real economy.
As proof, he cited Japan’s persistent struggles to grow despite near-zero interest rates; subpar growth in the United States; and emerging market problems in China, Brazil and Venezuela.'
- Landon Thomas Jr.,
Swedish Bank Move Creates a Global Shudder, February 11, 2016</blockquote>
Context<blockquote>
'..the Federal Reserve’s deranged program of quantitative easing..'(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'</blockquote>