This Zero Hedge article suggests that the central bankers are, at least, talking about the idea of a controlled financial collapse. The article includes this quote from the recent annual report of the Bank for International Settlements (BIS); aka, the bank of the central banks.
The risk of normalizing too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .
Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …
“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”
Wow! Can’t be any clearer an honest than that. When the BIS speaks of the risk of “normalizing” too late or too slow, they are saying that what the central banks have been doing these last years was not “normal”. In other words, the BIS is admitting the it is the central banks who have created these financial bubbles. Then the BIS says that “bringing forward the downward leg of the cycle”, starting the collapse now, will cause less suffering than if they wait for things to run their natural course. In the second paragraph, the BIS admits that the policies the central banks have been using have made everyone feel “illusively richer” and that the quick fixes they would like to use will only add fuel to the already raging fire. In the last paragraph, the BIS is saying that the recovery from the coming collapse is going to be a long haul so it is best to get started sooner rather than later.
So, will Janet Yellen and our illustrious Federal Reserve be a party to a scheme to bring on the coming financial collapse sooner than it would otherwise occur? Apparently responding to the BIS suggestion, Ms. Yellen had this to say at a recent IMF meeting:
“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”
Hmmm. Ms. Yellen seems to the more obtuse in her statements than Ben Bernanke was. She is apparently saying that she doesn’t think pooping bubbles is the proper thing for the Federal Reserve to be doing. Maybe she just doesn’t want to admit that the Federal Reserve and other central banks are responsible for creating the current financial bubbles. Or, maybe as the Zero Hedge article suggests, politically she can not say publicly that the Federal Reserve will aid in bring on the next financial crash. Of course, there is always the outside chance that she is being honest and plans to let the bubbles burst on their own even if the consequences will be worse.
I guess we have no choice but to wait and see what the Fed really does. One thing is for sure. The bubbles that many of us have been talking about are real and they are going to burst either by design or otherwise. Either way, we mere mortal are the ones who will pay the consequences.
Well, that’s what I’m thinking. What are your thoughts?