BIS and IMF attacks on quantitative easing deeply misguided warn monetarists

Monetarists across the world have warned that the International Monetary Fund and the Bank for International Settlements are making an historic error by calling for a withdrawal of emergency stimulus before the global economy has fully recovered.

The two watchdogs launched broadsides against central bank largess last week. The BIS -- the forum of central banks -- was particularly blunt, seeming to imply that quantitative easing "does not work".

RayUSA: Here in America, what exactly has the ongoing, seemingly never-ending QE policies of the Fed accomplished other than kick these worsening problems down the road?  Some might say "look at the stock market"… the same voices were heard gleefully proclaiming their excitement regarding the housing market before its Fed inspired bubble collapsed.  I suspect the same outcome awaits the equity markets. The Fed, along with the rest of the world's central banks, has used up virtually all the ammunition in the arsenal.  Now, what is left are nations with debased currencies along with virtually all of the same problems that were in existence prior to the collapse in 2008. Oh, I almost forgot. There is one other nasty little item, and that is the mountains and mountains of debt incurred via all this QE.  Eventually, interest rates will rise and the costs of paying this debt will cripple the nations.  In the USA, for example, if the interest rate rises to just 5% (historically a low rate), ALL of the tax monies collected that are currently being used to pay for the entire yearly US military output will be needed just to pay for the servicing of the debt.  This is what has our politicians in a panic.  They KNOW the game is nearly over and are frightened of the unforeseeable consequences. The central bankers (along with their obedient politicians) are the ones that, in large part, caused this mess in the first place. To think that these people will get us out of it by continuing the failed policies that got us into this mess is nothing short of fanciful thinking.

dempster: There’s been more nonsense written about quantitative easing than just about any other monetary issue.  So to put the matter straight: Quantitative easing is printing money. It doesn’t create anything other than money. Quantitative easing as practised by the Bank of England is just another tax. The Bank of England creates money from nothing and buys up existing government debt. This keeps the government solvent. It also erodes the real value of all sterling deposits. It is simply a tax on the value of existing money. It is slightly different from v.a.t. because v.a.t. is selectively applied (for example cold food is exempt).   Printing money (Q.E.) is a tax applied to all purchases made in sterling.

zeehan: the Thai stock market is up 50% this year as are most Thai mutual funds… and overall the market has gone up 700% from its 1998 post-crash low. a bubble? well, one Thai financial journalist in Bangkok says the office cleaner in his building trades stocks on his smartphone at lunchtime. progress? or maybe like JP Morgan's famous expression, when the shoe-shine boys start giving stock tips, it's time to sell every stock you own… Thailand and all of SE Asia is certainly bubbling over, real estate especially.

chungkwoyan: Superb post from Cambodia! The bubble , as you rightly point out, is bursting in no time. First class analysis.

zeehan:  if an idea ever got into your skull it would burst your brain…

whitewolfe: The QE should have been used to clean the system of the bad debts and restructure the banks. If that meant that housing prices in UK went down 35%, so be it. We are never going to get out of QE!

McQueue: Yes, exactly - we would have paid once for the mistakes of others (and they would have paid also) rather than we pay many times over (and they walk away intact).

chan: Monetarism, like any Ponzi scheme is based on confidence. It is imperative that governments and central banks keep confidence alive. However, more and more people are now looking at Fundamentals, and they do not like what they see. So bigger and better Lies need to be told to keep this vessel afloat. But nothing lasts for ever, the day of reckoning will dawn. That is a fact that you can be 100% confident in.

twizzle: Agreed. The printed 'money' is all going in one direction…big banks. They have, in effect, unlimited purchasing power to ensure that 'financial pictures can be painted'. Stock markets rise exponentially and yet current macro data from the US is truly awful. In the last reporting season, US corporate revenues missed guidance in over 50% of cases…and the guidance had been continually lowered throughout the last quarter. Gold is being axed practically on a daily basis. The price of gold is the canary in the coalmine. We can't have a rising gold price, can we. 'Investors' are happy to buy Greek bonds from a country undoubtedly bankrupt at below a 10% yield…back in the mid-90's the US 10 year treasury yielded 7%!! Italy at below 4% and Spain at under 5% is a complete nonsense and simply stores up bigger and bigger debts and bigger and bigger problems down the line. It could continue indefinitely. The money printing is unlimited. But there is one problem. It would appear that none of this largesse is hitting main street. Wages static, under estimated inflation and rising taxes. It's a recipe for complete and utter disaster.

klaatuwithgort: BRILLIANT!!!!! The world's best economists cannot agree. Great… I shall consult my Old Gran in that case, but I already know her answer: "You can't continually live beyond your means without going bankrupt." Hands up all those who think she deserves $500,000 a year and no tax like Lagarde.

junglejim: If you examine what Bernanke has actually done as compared to what he says he has done, there is a considerable difference. Little of the QE funds have actually gone into the real economy.  Most went into the stock market or were redeposited with the Federal Reserve at interest.  Job growth remains anemic. The principal thing that he has done is to transfer the "toxic waste" mortgage debt from the  banks who created it to the public.  Thus, the stock market boom is being paid for by people who neither participated in it or profited from it.  In today's Washington, if you can't afford a lobbyist, you are out of luck.

zeehan: maybe this is the new normal… and, meaning no offence to any Americans who may be suffering financially right now, the last thing the US or the rest of the world needs is for a new boom/bust cycle to start. people including most economists need to stop drinking Alan Greenspan's koolaid. that stuff was poisonous.

junglejim:  I couldn't agree more, but remember, Bernanke is the "Sorcerer's Apprentice" he studied under Greenspan and has largely continued Greenspan's approach.  His programs have not worked unless you are reading the carefully crafted numbers Ben follows.  He is causing massive misallocation of capital and distortions in the debt markets.  The underlying problems are the debt mountain and a huge worldwide glut of productive capacity.  Those have to be addressed or we will NEVER recover. 

zeehan:  I know it, man… maybe some hawk will take over at the Fed soon… as for the debt and equity bubbles, I feel another crash and credit crunch is coming soon, and that will sort it out… ie market reality replaces wishful thinking. money could get tight again soon enough, and there may not be much anyone can do about it including Bernanke. his helicopter will be grounded.

chungkwoyan: I couldn't agree with you more. Must be the serene environment in Cambodia which makes you so insightful to make out this brilliant post. Keep it going, genius!

zeehan: oh don't you worry I shall continue to dazzle the world with my brilliance… unlike a moronic troll like you… go pluck a fluffy duck.

GreatBrithole: They have run the initial tests - they have printed billions, thus robbing millions of ordinary people in the process (virtually everybody who wasn't on the receiving end of the new money) and the results are in - there wasn't a revolution, the culprits didn't get slaughtered, the majority of people didn't even notice or understand the nature of the theft committed against them and their unborn children. The worst that happened was a bunch of irate comments on websites. So now that the results are in, this is the green light that they were hoping for. The elite can carry on printing themselves into unbelievable levels of wealth while the majority are printed into slavery. Never has a war been won so easily, never has a generation handed themselves over to debt slavery without even so much as a whimper.   The masses have been successfully dumbed down by state education, television, fast food, the toxic environment, mercury fillings - you name it - it worked.  They don't even understand the simple concept that if you allow a small group of people to print money at will while maintaining ZIRP and high inflation of necessities, then it becomes utterly pointless chasing small amounts of that money thinking that it will save you from enslavement. By busying yourself working for small amounts of deflating currency, you are actually busy getting poorer every day, busy feeding the beast (making corporations more powerful) and busy enslaving yourself. Why don't people get this?  Many of them have worked all of their lives, paying tax upon compounding tax on their income while struggling to salt away a little each month just to own a few meagre assets for 'security' or to pass on to their offspring. If anyone had walked into their home and picked up a few items there would have been hell to pay. But when the financial elite manufacture a crisis purely in order to pretend that 'the banks had to be saved or the consequences would have been dire' and then the same lie is used to 'save the economy' by printing money they just meakly say, "Oh, OK." The consequences are the same as the house theft above, except that not only are they robbed but their potential freedom and liberty and that of their offspring is under threat due to this surreptitious and creeping loss of wealth (and individual power). But people don't see it. Instead they see Royal weddings, Olympic and Eurovision distractions. They see voting for big brother and jungle contestants as important, while paying for the chance to be 'a millionaire' via the lottery - the dumbest wager ever known to mankind and one that confirms the stupidity of people - because the value of being a millionaire is becoming less and less with each print run, yet no one seems to notice or care, except to buy more lottery tickets. Hopefully, some will wake up when they read about the reality of their ignorance. BIS and IMF attacks on quantitative easing deeply misguided warn monetarists Well, they would say that, wouldn't they? I know I would if I was evil and owned the printer. I struggle to understand why anyone can't easily and clearly see that - a) printing money is theft b) no matter how much they try and complicate things and obfuscate things with silly names like QE and EVEN if there was an altruistic way of printing money, this lot are not going to be doing it in that manner and nor would most other human beings, it's not in our nature! You can't print money, share it with everyone and get richer in the process. The people printing money want to get richer!

nefti: Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system. The system remains still in the throes and aftershocks of the 2008 panic and the near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government. Further panic is possible and hyperinflation is inevitable. What continues to unfold in the systemic and economic crises is just an ongoing part of the 2008 turmoil. All the extraordinary actions and interventions bought a little time, but they did not resolve the various crises. That the crises continue can be seen in deteriorating economic activity and in the panicked actions by the Federal Reserve, where it proactively is monetizing U.S. Treasury debt at a pace suggestive of a Treasury that is unable to borrow otherwise. - John Williams, ShadowStats

PC249:   Mark Carney has destroyed the Canadian economy and created a housing bubble which will destroy the Canadian currency and force Canada into a union with the USA and Mexico. All Canadian assets have been sold off. He is utterly incompetent and does what he is told to do by the Bilderberg. Mark Carney is a Tri-lateral commission member with Soros, Rockefeller, Rothschild et al who are the people who stitched up Ireland’s economy last year on May 4th at the Dublin Intercontinental Hotel. He is a member of Skull and Bones He is a Bilderberg and under the control of Lord Red Shield as are Cameron, Osborne, Clarke (policy committee) Maude (who controls the conservatives in Parliament, Balls, Milliband (multimillionaire never having had a proper job) and Mandelson who is on the World Council of the Bilderberg. Carney has coordinated the Gold fixing scandal. /KWN_DailyWeb/Entries/2013/2/22_Whistleblower_-_Gold_%26_Silver_Smash_Orchestrated_By_The_BIS.html This is what is being done to us;

zeehan: I think Canada will stick around, but there is an old fashioned property bubble going on there due to ultra low interest rates and house horniness and banks eager to lend. any fool buying a Toronto condo at current list prices will find out soon enough about illiquidity in real estate markets and that prices can go down as well as up. one man's forced sale is another guy's bargain maybe some investors need to learn some hard lessons… the Canadian dollar will likely ease and act as a shock absorber as the bubble deflates…

liarpoliticians: Quantitative easing is a form of fraud, but you'd not know it from the way it's reported in the UK, especially on TV by the various news channels, and shows like Newsnight. Savers are the ONLY ones with money and the ONLY ones that can keep an economy moving in a recession / depression. Now that their money is being STOLEN from to give to borrwers and all the QE-holics, the economy is collapsing. Borrowers have no money, and savers can't spend to keep economy ticking over because their money is vanishing. So the UK economy will continue it's decline into eventual collapse, when the savers will be made to be as poor as everyone else - deliberately and by design by government and central banks.

zeehan: when Bill Gross sees bubbles there are bubbles. let's hope somebody is listening. personally, I hope the hawks start to rule the roost soon because I'm sick of having my savings destroyed by these money-printers.

chungkwoyan: Best post.  …because I'm sick of having my savings destroyed by these money-printers… Insightful comment! The best from a DT moderator. Suggest to put money in the Cambodia National Bank, much safer.

ubique: Isn't it interesting the way people who have inflation proof pensions and salaries are happy to print money and inflate the economy while the rest of us suffer.