Tuesday, May 28, 2013

As the market panic demonstrates, central banks are stuck on a treadmill of money printing

Oh what a tangled web central bankers weave when they practice to deceive… Last night’s panic in Tokyo, where the Nikkei dropped a stomach churning 7 per cent, demonstrates just how difficult it’s going to be for the world’s central banks to exit their loose money policies.

It’s not even as if Ben Bernanke, chairman of the Fed, said he was planning to exit; in fact, initially he said the reverse in testimony to Congress. It was only in the Q & A, and in minutes to the last meeting of the Fed’s Open Markets Committee, that a clear bias emerged to slow the pace of asset purchases “in the next few meetings”, so long as the economic data was strong enough.

What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which in turn would render the economic recovery still born. Both financial markets and the real economy have become addicted to “quantitative easing”, such that they can’t do without it.

The upshot is that we are going to see financial repression of the type being practiced in virtually all the major advanced economies – including, if only to a more limited extent, the eurozone – continue out into the indefinite future.

Full article: http://blogs.telegra … l-of-money-printing/

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