The last time Chicken Little (the banking interests) claimed the sky was falling was when Allen Greenspan, Ben Bernanke, Hank Paulson, and Tim Geithner made the claim in 2008 to President George Bush and Congress that because the sub-prime mortgage bubble had burst the taxpayers would have to bailout the banks or the whole world financial system collapse. You all know what happened as a result of the warning from the Chicken Little(s). We got TARP, Quantitative Easing (QE), and the Fed’s Zero Interest Rate Policy (ZIRP). You see, the central planners of monetary policy can’t help themselves anymore than the central planners of fiscal policy. They can not leave well enough alone!
Contrary to the “consensus” of expert opinions, your humble observer of the asylum we all have to live in, says categorically that the sky was not falling in 2008. I know that I am right, because when the sky does fall, there is no “tarp” that can protect us.
And, the sky is going to fall. By “sky”, of course, I mean the fiat, debt driven, monetary system foisted on the world by the central bankers and announced by President Richard Nixon in 1971.
The problem with central planning is that it always sends invalid or false signals. In the case of the central planning social engineers in Washington, the people receive the false signal that their entitlement programs (Welfare, Social Security, Medicare, Medicade, and now ObamaCare) can go on forever and they become addicted to them. It’s UNSUSTAINABLE! In the case of the central planners of our monetary system, the markets, lenders, and borrowers receive false signals about the price of money. Those few (big corporations and big banks) that have access to the central bank’s artificially cheap money become addicted to it. It’s UNSUSTAINABLE!
It is often said that alcoholics and drug addicts must hit bottom before they are willing to accept the cure. I would appear that the same is true for those addicted to their entitlements or to their easy money.
In this Mish’s Economic Analysis article, Mish quotes extensively the chief economist of Saxo Bank in Denmark, Steen Jacobson. Mr. Jacobson says things are so bad tha can’t get worse and that is why he is a optimist. If you read the article you come to understand that Mr. Jacobson sees the “sky falling” as a good thing and not a bad thing. He looks forward to the addicts hitting bottom so they can start to take the cure, sort of speak. Although Jacobson is talking about the situation in the European Union, please read the quote below and pretend he is talking about the US and the Federal Reserve, because he could be.
The worst thing about the situation, however, is that the reason a blue chip company like Nestle can borrow at less than one percent in the capital market is the lack of alternatives for banks and investors. Less creditworthy small and medium enterprises (SMEs) which make up as much as 80 percent of many countries’ economies are not allowed to borrow. They are deemed too risky to lend to at the current “market rates” even though they hold the key to improving the employment and productivity picture.They are willing to work cheaper, longer, harder and with higher risk tolerance in order to survive. So the remaining 20 percent of the economy occupied by large and publicly listed companies and banks gets 95 percent of all credit and 99 percent of all political capital. In other words, blue chips receive artificially low interest rates only because the SMEs don’t get any credit. Herein lies my continued belief in the my traditional opening statement: things must get better soon because they can hardly get any worse.
We have never been in a more dysfunctional state at the corporate, political and individual level in history. It’s time to realise that the reason capitalism won the war against communism in the 1980s was its strong market based economy—itself based on price discovery. Now the policymakers in their “wisdom” are copying everything a planned economy entails: central planning and control, no price discovery, one supplier of credit, money and the corollary effect of suppressing SMEs and even individuals.
In 2014, a bout of near or real recession in Germany and the US could kick start the price discovery mechanism again, which will help us to start healing the deep wounds left by years of policymakers compounding their errors with round after round of extend-and-pretend. Getting to the bottom is good in one sense: the only way is up.
So, the next time Chicken Little(s) say the sky is falling; the sky will be falling! The Chicken Little(s) will be demanding that the printing presses be turned up to warp drive to pay off all debts. This the only way the banksters and the super rich can protect their wealth. One of two things will happen. The President and Congress will say no to the Chicken Little(s) and the world will be plunged into an incredible depression and the banksters and the super rich will take the hit along side of everybody else or the will say yes and we, the steaming masses, will take the hit alone.
There is a third possibility. The central bankers may just use their imaginary printing press and do what the Chicken Little(s) want without asking the President and Congress and then tell the world they had no choice.
Salvese quien pueda!
Well, that’s what I’m thinking. What are your thoughts?