Thursday, March 12, 2015

This Week's Quiz: How Can Janet Yellen and Stanley Fischer Possibly Be Considered Slightly Sober Monetary Policy Stewards?

The answer comes from David Stockman:
Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober.
He then explains:
 Japan is a bankrupt old age colony. China is the most monumental credit and construction Ponzi in human history. Europe is a terminal victim of socialist welfare and statist dirigisme. All three are attempting to defer the day of reckoning via a resort to a final spasm of money printing and central bank manipulation that is so desperate and crazy that it can only end in disaster....

Consider the absolute monetary madness in Japan—-where the current policy of the BOJ is to expand its balance sheet each month by what would amount to one-quarter trillion dollars on a US scale GDP...At the same time, the BOJ’s massive bond buying campaign is sucking up 100% of the supply of new government debt—–and Japan’s fiscal deficit is still massive—-and actually eating into the existing float. As a result, the Japanese government bond market is dead as a doornail; the only “bid” comes from the BOJ...

In China the scene is even more tortured..the overseers of red capitalism in Beijing have driven China into a monumental debt trap.

Its massive spree of construction and fixed asset investment has created an utterly deformed economy that will literally implode unless its keeps building empty luxury apartments, phantom cities, silent shopping malls and hideously redundant roads, bridges, subways and airports. Yet whenever the short-term indicators stumble, the government finds some new, convoluted way to release more credit into the system.

This too is reaching the farcical stage. During the six-short years since the financial crisis, China has boosted it credit market debt outstanding by the staggering sum of $20 trillion or by 4X the growth of GDP during the same period. How in the world could any one believe that China’s tottering house of cards can be rescued by piling on even more debt financed construction and fixed asset acquisition?

No comments:

Post a Comment