The Central Bankers Take Insanity to a Whole New Level

Those who don’t believe that the world’s biggest banks run the world need to think again! The world’s biggest banks own the world’s biggest central banks: the Federal Reserve, the European Central Bank, and the Bank of Japan. Of course, there is really only one central bank that counts and that would be the Federal Reserve. The heads of the ECB and the BOJ basically follow Ben Bernanke’s lead. It would appear that Bernanke, in his infinite wisdom, has decided that he is much smarter than anyone else. He has decided that the “free market” system isn’t good enough. He has decided that the central bankers should control the world’s economy (the global economy) rather than let the seven billion people who inhabit this planet to control the economy through their individual decisions on what to buy and what to sell. In other words, Mr. Bernanke does not believe in the natural law of supply and demand. He believes that he and his central banker friends in Europe and Japan can do a much better job of … what? Of protecting their owners, that’s what!

There is an unwritten law in the high finance world of Wall Street that says: Don’t bet against the Fed! Many a smart person believed that the Fed’s Zero Interest Rate Policy (ZIRP) and money printing, aka Quantitative Easing would destroy the dollar and so they, in order to protect their wealth, invested in gold. But, the central banks do not want any competition for their fiat currencies. Through ZIRP, they want people to invest in the stock market and not in precious metals. Those who bet against the Fed are getting hammered.

There is also a unwriten law for central bankers that says : Protect your bankers at all cost! But, sometimes the politicians get in the way of their betters. You may recall when Greece needed a bailout, the decision was made that the banks holding Greek bonds would take a major haircut. That is what created the banking crisis in Cyprus. They had invested heavily in Greek bonds. So, this time the banks had to be saved, And, as you recall, the banks of Cyprus were saved, more or less, by confiscating the deposits of the biggest depositors. That worked once because it was a surprise attack. Now the rich in countries like Spain and Italy and Portugal will be moving their money to Germany or other countries perceived to be safe. But cash money is not the only store of wealth. One can move money, but moving house or businesses or land is another matter. Zero Hedge fills us in on the latest plans for protecting the bakers:

… Germany’s Council of Economic Experts (or so-called ‘Five Wise Men’) just confirmed a wealth tax is coming. As the Telegraph reports, confirming our expectations, Germany warns that states in trouble must pay more for their own salvation, arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. They further added that targeting deposit-holders is also a mistake, since the “resourceful rich just move their money to banks in northern Europe and avoid paying,” preferring instead taxes on property or other less-mobile assets, “for example, over the next 10 years, the rich should give up a portion of their assets.” As we noted here and here, the differences between mean and median wealth in the peripheral nations suggest that people in the bailed-out countries are often better-off than those in Germany – – “this shows that Germany has been right to take a tough line of euro rescue loans.” However, the implications of a wealth tax – implicitly impacting the pro-euro Southern European uber-rich – raises the specter of EU breakup once again.

Raises the specter of EU breakup once again?

Your humble observer here at Asylum Watch has no special knowledge on monetary policy. I am not an economist. But, somebody tell me when has central planning ever worked in the long-term? Why would central planning by central bankers be any different? There is an excellent article at Fox Business titled: All the Rage: Central Banking on Steroids Goes Global. The article is worth reading because it offers opinions from experts on both sides of the issue.

Me? I always bet against central planning. If you are in the stock market, you’re going to do fine, as long as, you get out before the Fed stops it QE and ZIRP. The EU breakup will be the tip of the iceberg, in my opinion.

Well, that’s what I’m thinking. What are your thoughts?

22 thoughts on “The Central Bankers Take Insanity to a Whole New Level

  1. The Federal Reserve serves a dual mandate defined by the U.S. Congress:
    1 – Price stability
    2 – Maximum employment

    Those have been around a lot longer than Bernanke. Every action The Fed makes is tied directly to the dual mandate. It is required by law.

    Here is an example how it is supposed to work…

    When the economy falls into recession, like in 2008,The Fed lowers lending rates to its member banks to stimulate the economy. That serves both mandates – to prevent deflation and to recapture lost employment.

    No mystery to that.

    That is exactly what the Fed did in 2008. They lowered interest rates to practically nothing. When that happens it is called the zero lower boundary. The economy did not recover.

    The economy is so bad that The Fed has resorted to non-standard monetary policy to recover it. That is what is happening today.

    To maintain price stability and maximize employment The Fed also increases the monetary supply through private-sector asset purchases that it later sells – “quantitative easing” or “printing money”.

    The net result is an increase in the money supply available for economic stimulus.

    That became necessary to support the dual mandate after the zero boundary limit was reached in late 2008. We have had several shots of QE since then with limited success and are under a $45B/month QE right now.

    QE is not printing money out of thin air. The Fed is buy bank and corporate assets that the taxpayers own. Taxpayers will likely make money off QE when those assets are sold.

    Not everything The Fed does is going to work as advertised… and hasn’t yet. A lot of what it is doing is downright scary.

    We may not like it, but a healthy banking sector provides the liquidity that is prerequisite to a healthy economy.

    The banking sector has now paid off its 2008 TARP loans (at a profit to taxpayers) and is basically just now recovered.

    Now we are theoretically in position to recover the general economy.

      1. My point isn’t that The Fed has met its dual mandate… clearly it has not.

        My point is that all actions The Fed takes are specifically designed to meet the mandates and for no other reasons.

        Do some of those actions result in more money in the system? Absolutely. As a nation’s wealth increases the monetary system needs to adjust to accommodate the increased amount of wealth. It is necessary to meet the price stability mandate. To make that adjustment The Fed buys and sells bonds.

        Does The Fed “print” money? No. The U.S. Treasury prints money.

    1. Geezus AZ, you sound like Bernanke’s mother or a government lackey.

      And btw, just who do you think the Fed is gonna sell that 4 trillion of debt they printed up to? And even if they can find a buyer- who’s paying the interest?

      1. I’m a less-government, lower-taxes kinda guy. I don’t like tinkering with the monetary system at all, but it is necessary to balance out fluctuations in the economy.

        Before The Fed the U.S. had severe “boom and bust” swings, called “panics”, in the 1800s and early 1900s. That went away once we started managed monetary policy.

  2. You may recall that none other than Donald Trump has called for a wealth tax –

    And this guy was leading the GOP polls in 2011 showing that even on the right, stealing private property and trampling on the Constitution is OK once in awhile if it’s considered to be for the greater good.

    Can you imagine if the IRS showed up at people’s doorsteps today and told them they were there to confiscate over 97% of their wealth as the Fed has done since 1913? Yet the Fed will still have its supporters.

    If our public schools were required to add a course explaining the true fundamentals of money, this charade would have ended many years ago.

  3. I hate to toot my own horn here, but in my book: The Tamarack Conspiracy (available either digitally or paperback at Amazon) as the government ran up more debt and sunk the economy through taxes and regulation, and, of course, ran out of money as the poor economy produced less and less revenue, they began taxing wealth (assets).

    My fiction included one other thing that will doubtlessly become a reality too–The people who avoided having their wealth taxed were the people willing to give up their freedom and any connection with a free market and become government cronies and insiders. They were able to retain their wealth by “bending the knee” and it resulted in them being allowed their own little fiefdoms. Isn’t it amazing how a powerful federal government quickly leads to a feudal society with an elite running everything, having the money, and the rest of us living as serfs.

  4. The latest German suggestion to impose a tax on the wealth and assets of those in countries that need a bailout is exactly what Margaret Thatcher warned us about in her visionary opposition to have Great Britain ceding her sovereignty to and ultra-state like the EU. It saved the UK from joining the Euro.

  5. You may not be an economist but you understand this a hell of allot more than I do and I appreciate your insight. We are being controlled and manipulated by these bankers and in the end they will win and we will lose!

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