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When Central Bank Interventions Only Causes Crisis

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EDITOR NOTE: This next piece has a simple yet brutal thesis: that central banks are often lauded for solving the very crises that they have created. In America, we can see the steady dollar value declines since the Federal Reserve seized monetary control in 1913. That negative trajectory accelerated once the gold standard was abolished in 1971. But here’s the question the author poses--are central bankers so oblivious to everything going on outside of it because of some form of “domain blindness,” or are they deliberately creating a “financial economy” despite the massive wealth transfer that it creates because somehow they believe it is the only kind of economy that can be manipulated and controlled? In other words, is the Fed cognizant that its economic cure of central bank interventions may also be the toxic source of the economy’s illness?

File under: “It is impossible to get a man to understand something when his livelihood depends on his not understanding it.”

This morning  I came across a Bob Murphy tweet replying to Mark Carney, the Canadian central banker and Davos darling:

It turned out the tweet he was responding to was the fourth in a 5-series tweetstorm, fittingly authored on April Fool’s day, extolling the virtues of central bank mangling of stewardship over the financial markets.

The series was extraordinarily devoid of self-awareness, taking a victory lap on behalf of central bankers and  The Saviour State.

The market certainly can “be wrong” longer than most participants can stay solvent.  Especially when “being wrong” means mind-bogglingly overvalued and being propped up by central bankers like Carney printing money out of thin air, holding interest rates to the floor and exacerbating wealth inequality.

Carney is right. Hoping that central bankers finally figure it out isn’t a strategy.

That’s is precisely why when the central bank induced asset bubble popped in the GFC of 2008, and central banks simply doubled down on the failed policies that created it in the first place, Bitcoin was born.

After that it took on a life of its own, myriad other crypto currencies followed in its wake and now, these non-state, decentralized crypto currencies are sucking wealth out of bonds, fiat and cash.

The slower moving gold hit two successive all-time-highs while the central bankers kept printing. And now with the Fed, the ECB, the BOE, BOJ and the BOC trapped with yield curve control as the only play left, everything else is screaming higher. Bang up job, guys.

You may not be able to spin yourself out of a crisis. The only move is to print money.

This one was a case of the arsonist wanting a hero cookie for putting out the fire. I always like to refer to David A. Stockman’s “The Great Deformation” for an in depth analysis making the case that had we let the overleveraged banks go down, the result would have been a short, sharp financial crisis limited “to the canyons of Wall St”, and we’d have had a real recovery built on much sounder footing.

Had we done that, we may have not been so trapped when the COVID-19 pandemic hit. But instead, we’ve had to double and triple down yet again.

So tell me, when the inevitable crisis that is the product of the last several decades of central bank interventions hits, and it will, who will it be blamed on? Libertarians and free markets run wild? If that’s what you call the last 10 years, I’d hate to see what the likes of Carney think centrally planned, command economies look like.

Ah yes, The Saviour State. Where would we be without them? Not on lockdown? Not living in a world where that which is not expressly permitted is now forbidden?

…one tweeter followed up the famous Upton Sinclair quote:

“It is impossible to make a man understand something when his salary depends on him not understanding it”.

The Nation State is done. Jesse, Charles and I talk about The Network State supplanting the Nation State. We used to talk about it happening in the future. Since COVID hit and the ham-fisted policy responses across the board, we now talk about it happening, like the Great Reset, in the present.

Original post from TheBombthrower

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