'..And after betting the ranch on QE, there is today no consensus as to what to try next .. The much more important issue is how in the world are central banks to now extricate themselves from deeply flawed policies that have so destabilized global finance?'<blockquote>'In a world of endless QE, liquidity abundance and resulting investor confidence, India’s massive financing needs appear manageable. But QE has not worked as global policymakers anticipated. The BOJ has printed a Trillion, yet a 25% decline from last year’s highs has Japanese stocks benefiting little from unprecedented money printing. The situation in Europe is similar: European stock markets have little to show from the ECB’s Trillion of new “money.” And in both cases, consumer price inflation has proven impervious to an additional Trillion. In the past, the inflationists would invariably claim that monetary stimulus was not working as prescribed only because it was not being used in sufficient quantities. These days, only the fanatics refuse to accept that QE is not very effective – while coming with huge risks. And after betting the ranch on QE, there is today no consensus as to what to try next.
May 20 – Reuters (Leika Kihara and Stanley White): “A rift on fiscal policy and currencies has set the stage for G7 advanced economies to agree on a ‘go-your-own-way’ response to address risks hindering global economic growth at their finance leaders' gathering that kicked off on Friday. Japan backed away from its previous calls for coordinated fiscal action to jump-start global growth with Finance Minister Taro Aso saying on Friday that while some G7 countries can deploy more fiscal stimulus, others cannot ‘due to their own situations.’ That chimed with Washington's stance made clear by a senior U.S. Treasury official that there was no ‘one-size-fits-all’ for the right mix of monetary, fiscal and structural policies.”
Friday from the Wall Street Journal: “U.S. and Japan Heading for Standoff on Yen Devaluation,”
and from Reuters: “Japan, U.S. remain at loggerheads over yen policy.” What a far cry from Dr. Bernanke’s “enrich-thy-neighbor” (as opposed to “beggar-thy-neighbor”) that he previously used to describe the Bank of Japan’s aggressive monetary stimulus and devaluation. The theory and experiment just didn’t play out as expected. Proponents, however, persist with the “things are still a lot better than they would have been without QE.” The much more important issue is how in the world are central banks to now extricate themselves from deeply flawed policies that have so destabilized global finance? Are this week’s rising Treasury yields partially explained by renewed fears of EM central bank liquidations?
I believe historians (and many others) will look back at this period and struggle to comprehend how such Unambiguous Signals were Disregarded: Declining equities and commodities prices in the face of massive QE; out-of-control debt growth in China; EM financial and economic travails; competitive devaluations and wild currency market volatility; unfathomable global bond yields; sinking global bank stocks; hedge fund struggles in the face of aggressive monetary stimulus; U.S. political upheaval (deep divisions, Trump, Bernie, etc.); rising geopolitical pressure across the globe; and tensions between the U.S. and China heading to the boiling point. The VIX jumped to 17.6 Thursday afternoon, near a two-month high.'
- Doug Noland,
Unambiguous Signals Disregarded, May 21, 2016</blockquote>
Context<Blockquote>
Praxeology: The Austrian Method (by Hans-Hermann Hoppe) - Introduction to Austrian Economics, 6of11(Praxeology) - '..his or her subjective values .. to explain all economic phenomena as the results of what people do..'(Haptopraxeology) - '..a praxeological framework for medicine..''..monetary knowledge .. of currency reform under difficult conditions you have to go to Carl Menger.'(Banking Reform - Monetary Reform) - '..The Theory of Money and Credit .. an invaluable guide for ending the business cycles of our own time.'</blockquote>