No, Central Banks Won’t Save Us This Time

No, Central Banks Won’t Save Us This Time

By Charles Hugh Smith – 21 Aug 2023

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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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