Tuesday, June 11, 2013

Central Banks Are Never In Control

By, Chris Rossini

BusinessInsider is running a piece titled "Central Banks May Finally Be Losing Control".

Along with the title, the piece contains the following paragraph, which I'd like to discuss:
Because the Federal Reserve is by far the biggest player in the Treasury market, the concern is that when it makes the eventual decision to taper back the pace of the bond purchases it makes under its open-ended quantitative easing program, markets could destabilize as a result.
Let's start with the title:

Central Banks are never "in control". The Market is always more powerful than both central banks and governments. The Market always wins in the end.

The only thing that both central banks and governments accomplish is to artificially manipulate the market, giving a false impression of reality.

As anyone who has ever been out drinking at a bar can confirm - the artificial is always temporary.

When the artificial starts to wear off (or "taper" in central bank lingo) there's hangover (or "recession" when it comes to economy).

Pain is attached to the return to reality. It's life's way of teaching us that "Hey, you better watch your actions. Take it too far, and you'll kill yourself."

Unfortunately, Ivy league professors think that they're smarter than nature and economic law, and "taking it too far" doesn't seem to phase their oversized egos.

But we can let them live in their fantasylands; for the hangover will come in one way or another.

When that time is upon us, it's very wise not to view the situation as BusinessInsider does. For markets will not be "destabilized". On the contrary, they will be "stabilizing"; and returning back to reality that been hidden behind the smoke and propaganda.

It is the central bank that does the "destabilizing".

The hangover is the cure! The recession is the cure!

To think that central banks are ever "in control" is about as naive as one can become (economically speaking). Central banks are like a fly on a lion's back, always trying to outsmart the giant tail that's swatting it off.

The fly never takes down the lion.

Instead, the King of the Jungle sits there, patiently, until WHACK! It finally gets a direct hit, and the fly retreats.

In the same vain, governments and paper monies come and go. They never last beyond the temporary.

The Market, on the other hand, is always there, and always swatting away the latest crazy attempt to overpower it.

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