Warning! Warning! BS Alert! BS Alert!
Good lord. I didn’t expect my BS alarm to fire so early in the year. I apologise for the blaring. It triggers automatically.
Is it malfunctioning or did someone set if off? Shiver me timbers!
The guilty party is none other than one of my favourite comedians — Señor Mark Carney, the outgoing central bank governor of the Bank of England.
Ha! He has me in stitches this morning!
He’s saying things so patently ridiculous that I’m holding my stomach from the laughter — and it’s setting my alarm off at the same time.
Perhaps his new role is going to be as a comedic actor?
Comedy routine from an economic stiff
The Financial Times reports that the señor is warning the world is heading toward a ‘liquidity trap’ and that central banks have ‘much less ammunition’ to fight the next big recession.
I can barely see to write this from the tears in my eyes. How absurd!
Someone just suggested to me he is being serious. Surely not?
Yes…it’s true…and the Financial Times is reporting these words as though they are gospel.
Give me a moment to collect my thoughts…
Let us reflect a moment on his proposition.
A central bank controls the nation’s printing press. Its cost of funds is zero.
With this power it can create as much money as it likes, especially in a deflationary environment such as a recession would entail.
What on Earth more do you need than an endless and free money to create a recovery?
You would think Señor Carney, having spent eight years at the Bank of England, would have had time to read up a little bit on the Bank’s illustrious history.
In 1914, the Bank ran the printing presses and bailed out the entire UK banking industry. You can read all about that here.
I don’t recall them being prevented from doing this from any liquidity trap or lack of ‘ammo’.
And yes, throughout history, we can see more examples.
Hitler’s popularity in Germany came about because he moved the economy out of the Depression.
Hitler was a politician. He couldn’t do it on his own — but a friendly man at the central bank sure helped!
The Reichsbank reinflated Germany, not the Nazi Party.
Yes…and we can know that the Bank of Japan took a shattered Japanese economy in 1945 and turned the economy into a global powerhouse.
But no, the Señor would have believe that all this is not possible today, despite the fact the Bank of England create £375 billion — from nothing — after 2008.
The Fed printed trillions. They’re still juicing things today.
You see…this is why you must never believe central banks. They have their own agenda.
Señor Carney’s drivel about a ‘liquidity trap’ is total garbage from start to finish.
The idea here is that once interest rates hit zero, or near enough, there’s no room to ‘stimulate’ further borrowing and spending.
Left unsaid here, in any discussion around this, is why previous interest rate cuts did not stimulate the economy in the first place.
Australia a perfect example of the uselessness of
standard monetary policy
For example, the Reserve Bank has cut the cash rate from 4.75% in 2011 to 0.75% today.
Where are the fruits of this apparent bonanza in Australia right now?
Oh dear…the economy grinds along.
How could this be?
That because interest rates are not the determining factor in the economy.
It’s the total amount of credit creation. This has slowed in Australia because of the royal commission into the banks.
Clearly Señor Carney is working toward another end with his musings.
What could they be?
I’ll hazard a guess. What better excuse than to launch a central bank digital currency?
After all, the central bankers are preaching to the world that they are running out of ‘ammo’. The general public probably believe them.
Surely a new tool could help…one that provides total control over the economy and can track every transaction?
I can say I’m not laughing anymore. Because there’s nothing funny about that.
If you want to wise up about what central banks are up to, start here.
PS: Learn where to find under-priced stocks that could break out in 2020. Download your free report here to learn more.