FX Thoughts : A New Era of Megalomaniac Central Bankers
Uses of QE :
- cures unemployment
- cures deflation
- cures recession
- CANNOT CURE EBOLA
Bernanke proved he had more celebrity power than all the world leaders combined and Yellen was widely heralded to be the most powerful woman on Earth.
And here comes Draghi and Kuroda, both vying for the title of Megalomaniac Central Banker Numero Uno, Infinitesimo. Draghi with his $ 1 trillion grand scheme and Kuroda with his extra 100 bio that outshone him.
After the FOMC finished with the tapering of bond buys, we had dozens of reports telling us what to expect and what to buy and not to worry, stocks and bonds were safe bets.
Then Kuroda came with his whopper of an announcement, to expand their monetary base by another 100 trillion (approx less than US 100 bio), which barely scraped the Yes vote, 5-4. And the markets went wild not so much because they expect that this great monetary experiment would work, but because of what they can profit from.
Therefore, the JPY weakened 4.6% against the USD and every one of the other 171 currencies in the world except the Russian Ruble (-6.43%).
That is not good enough !
Because crude oil fell more in the same 4 day period.
They are not all the first.
According to Wikipedia, Quantitative Easing was first used by the Bank of Japan back in the early 2000’s to fight domestic deflation after rejecting its use for monetary policy previously. http://en.wikipedia.org/wiki/Quantitative_easing
But look back at the headlines in Sep 2012 when Bernanke announced indefinite QE3 of US 80 bio per month till THERE WAS SUBSTANTIAL IMPROVEMENT IN THE LABOUR MARKET.
Ron Paul : “Country Should panic over Fed’s decision” http://www.zerohedge.com/news/ron-paul-country-should-panic-over-feds-decision
Fed’s QE Meds May Hamper Economy’s Health http://www.cmegroup.com/market-insights/banks/market-insights-economy-health-2012-09-13.html
Fed’s New Brand of QE to Deliver the Right Message http://www.reuters.com/article/2012/09/14/us-usa-fed-woodford-idUSBRE88D00R20120914?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943
Marc Faber, Famous investor: Fed’s decision “will destroy the world” http://huff.to/RRN7jC
He was not the only one. Even Paul Volcker saw the Fed’s moves as “destabilising“.
Calls for liquidity trap and irresponsible came from all over the world.
Bank of America then saw Fed’s assets surpassing $5 trillion by end of 2014, and we are close. But the market’s prediction that Gold would be at $3,350 and crude oil at $190, could not have been more wrong.
Time is the great healer and now Bernanke charges $ 250k per speech post his tenure at the Fed, demonstrating the inflation of our times because all Alan Greenspan got post retirement was $100k.
And now Kuroda is using the same “All It Takes” QE in Japan to CREATE INFLATION. And Draghi is using his 1 trillion for PRESUMABLY INFLATION AS WELL AS A CURE ALL FOR THEIR ECONOMIC ILLS !
We all struggle to rationalise in our heads.
1. Is spending a lot more than you earn a good thing ?
2. Is printing money the most efficient way to create Employment and Inflation ?