Global central banks still have their foot on the accelerator—tapering by the Fed notwithstanding. The evidence for that is plain as day—-namely, essentially zero money market interest rates throughout the OECD world including Europe, Japan and the US. There is no chance whatsoever that money market rates would be zero on the free market—-and not for six years running.
But they are zero notwithstanding 2% official inflation for the last decade throughout the OECD for one reason: the central banks have flooded financial markets with trillions of excess liquidity.
So how is that working out? Its not. Today the Wall Street Journal reports that the 34 DM economies which comprise the OECD suffered a further deceleration of growth in QE1. Real GDP expanded by just 0.4% over the prior period or about 1.6% on an annual basis.
So the verdict is straight forward. Do we need the most reckless monetary experiment in history—–free money worldwide for financial speculators and gamblers—-in order to get measured GDP growth at such anemic levels? That is, levels which are less than half the growth rates which prevailed before the money printing frenzy began 15 years ago?
Pick a random million people from the phone books of the OECD countries and their answer to this question would be a resounding no. But monetary central planning and destructive financial repression continues in full force, and threatens to worsen in Europe, because a few hundred unelected central bankers and their top staffs all drink the same Keynesian Cool-Aid.
And they do so because they have fused erroneous doctrine with an abiding fear of a Wall Street hissy fit if they eliminate the juice. In effect, central bankers have have been taken hostage by financial market gamblers and carry traders.
The abandonment of sound money by all the world’s central banks thus has had a huge consequence. It’s conferring a massive speculative windfall on financial gamblers unlike any prior history. And it does so while suffocating what remains of capitalist economies which desperately need debt liquidation, not zero interest rates.
Meanwhile, a purported adult member of the ECB Executive Board, Peter Praet, grandly announced yesterday that he would seek a reduction in the ECB’s financing rate from 0.25% to 0.15%.
Is he kidding! The Eurozone is already drowning in debt, with public and private credit market debt outstanding at 425% of GDP. And this clown thinks lowering the financing rate by a microscopic 10 basis points—that is, from the cellar to the sub-basement—will make any difference? And then he also proposes to throw in negative deposit rates to boot.
It can be well and truly said that the world’s central banks are now under the spell of mindless Keynesian doctrine. It is a curse with untoward implications that are beyond horrid.
May 18 (Reuters) – European Central Bank Executive Board member Peter Praet will recommend that the bank cut its main refinancing rate to a record low 0.15 percent from 0.25 percent at its policy meeting on June 5, according to the German magazine Der Spiegel.
Economic growth in the 34 countries that are members of the Organization for Economic Cooperation and Development slowed for the second straight quarter in the three months to March, the Paris-based research body said Tuesday…..
The OECD said the combined gross domestic product of its members increased by 0.4% in the first quarter from the final three months of 2013. That marked a slowdown from the 0.5% rate of growth recorded in the fourth quarter of last year, and the 0.7% rate of growth recorded in the third quarter.
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