In response to an FT article by Wolfgang Munchäu on 6th March 2016, entitled 'European Central Bank must be much bolder'
Negative interest rates are a perversion of capitalism - a virus. A free market would never produce negative rates in a million years. Central Bankers have managed it in a few decades. These fools have absolutely no idea what they are doing, any more than they did when Ben Bernanke introduced QE and announced to the world he was 100% sure it would work.
According to Steen Jacobsen, the CIO of Saxo Bank, 75% of all new liquidity is being consumed to service existing debt. Banks do not want to lend and people do not want to borrow because:
1. Individuals are not interested in buying crap they don't need with money they haven't got
2. Businesses are reluctant to make long-term plans in an environment that everyone except Central Bankers, neo-Keynesian economists and financial journalists can see, or at least are beginning to suspect, is a disaster waiting to happen
These policies are wrecking the economy; creating fear not confidence, encouraging financial engineering not entrepreneurial activity, boosting saving not spending. This isn't news to people who live and work in the real world, people who run businesses, or to people who can put themselves in another's shoes and imagine what it must be like for them. But take a group of academics and bureaucrats, few of whom have ever run a business, made a payroll, managed money or even had a job outside an institution, and it doesn't seem to register.
Clearly, the theoretical models they cannot even agree on amongst themselves, are as useful as a chocolate teapot when it comes to understanding or predicting the real world. So we are back where we started: The debt policy is extend and pretend. The inflation policy is to import it through trashing the currency. This is a race to the bottom...which no one will win...because the problem is global.
And how is this global issue being handled? Each region is at different stages of insanity, but there is a basic proposition that is common to them all right now:
'QE has failed, let's go back to the people who said they were sure it would work and see what else they've got'
This proposition is dumb. I suggest we try this instead:
'QE has failed, let's go back to the people who said it would fail right from the start and ask them what ideas they've got'
This will not happen of course. These guys are 'all in’; they are defined by hubris and protected by cronyism. Am I cynical? Yes. I have come to the conclusion that we will not get a change in direction, or a clear out of failed policy makers, until this house of cards collapses.