No, Central Banks Won’t Save Us This Time
No, Central Banks Won’t Save Us This Time
The costs and consequences of central bank distortions have finally come home to roost.
There’s a fanciful confidence afoot that central banks will once again coordinate a global “save” as markets careen out of control. They won’t. There are many reasons for this:
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There is no incentive to coordinate efforts, as each nation/region has vastly differing interests. Each faces a different mix of real-world inflation / deflation of assets, stagnation, currency issues and competing domestic / global interests.
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On top of those diverging interests, a low-level “economic warfare” is being waged between dysfunctional co-dependents China and the US, which are like a co-dependent couple who want a divorce but need each other to pay the bills, all the while pridefully (and falsely) claiming they can easily do without the other.
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The era of low inflation has ended, and so has the era of ZIRP (zero-interest rate policies). The central banks are now perched on the horns of a self-inflicted dilemma: to boost flagging growth, they need tp lower interest rates (their “one weird trick” they picked up off a spam site somewhere), but since they let inflation become embedded and geopolitics is jacking up real-world costs, the usual tricks of dropping rates to near-zero and flooding the financial system with “free money for financiers”, a.k.a. liquidity, will reignite still-simmering inflation.
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The statistical gaming can’t hide the fact that inflation is still crushing wage earners. The statistical game is that inflation is measured year-over-year, as if it magically resets every year. But it doesn’t reset; all the inflation of the previous years is still present, burdening wage earners.
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