'..top central bank officials believed monetary policy was responding to outside developments instead of being a root cause of deleterious processes that ended up tearing society apart .. I’d argue strongly that years of unsound finance is at the root of today’s increasingly dysfunctional political landscape.'<blockquote>'These days I think often of Adam Fergusson’s classic “When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany.” One of the more fascinating and pertinent aspects of Fergusson’s historical account was how monetary policymakers somehow remained oblivious to the havoc they were instrumental in fomenting. Throughout the ordeal, top central bank officials believed monetary policy was responding to outside developments instead of being a root cause of deleterious processes that ended up tearing society apart. Despite what should have been an obvious disaster in the making, the central bank succumbed to constant pressure from various constituencies to step up its money printing operation.
Americans’ confidence in its politicians is at a multi-decade low. The popular refrain remains “Thank God for the Federal Reserve!” Somehow, it goes unappreciated that flawed monetary doctrine has been instrumental in fomenting societal stress, divisiveness and the steady erosion in the American public’s faith in its institutions. A multi-decade period of unsound “money” and Credit has fueled an ongoing perilous cycle of asset Bubbles, booms and busts, gross misallocation of resources with resulting economic stagnation, and inequitable wealth distribution on a historic scale. Unfettered “money” and Credit on an unprecedented worldwide basis have been responsible for unmatched global financial and economic imbalances, including the deindustrialization and ever-growing debt overhang that hamstrings the U.S. economy. While it is difficult to hold much sympathy for today’s politicians, I’d argue strongly that years of unsound finance is at the root of today’s increasingly dysfunctional political landscape.
Fundamental to my “Granddaddy of all Bubbles” thesis are the momentous risks associated with governments’ and central banks’ reflationary policymaking – a policy course that for five years now has inflated the expansive “global government finance Bubble.” QE (“money”-printing) cost vs. benefit analysis has turned more topical of late. Again this week, top Fed officials (Evans and Rosengren) argued that QE benefits greatly exceed “marginal” potential costs. History will not be kind. At the end of the day, the loss of confidence in the Fed and central banking more generally will come at a very steep price.'
- Doug Noland,
Plosser’s Limited Fed: A Statesman Takes a Stand, November 22, 2013</blockquote>
Context<blockquote>
Credit Boom in China Could Trigger Bigger Crisis Than 2008; Three Things China Wants, Eight Things China Needs, November 8, 2013
Central Banks: The True Centers of Political Power, November 7, 2013
'..the theorem of the economic impossibility of socialism .. is fully applicable to central banks..' - Jesús Huerta de Soto
Banking Reform</blockquote>