In response to an FT article by Wolfgang Münchau on 3rd August 2014, entitled 'A desperate Bundesbank has abandoned principle'
Mario gets his oil can out ready to get the printing press rolling just as Janet puts hers in the garage for its $4tn service. What a coincidence, one would almost think the Central Bankers are all working for the IMF! The pesky BIS seems to be a fly in the ointment though…they seem to be having doubts about all the money printing…trouble brewing in Keynesville?
Quite a tricky one:
Deflation = Governments can't pay off their debts and illiquidity reveals itself for what it actually is - insolvency
Inflation = Governments can pay off their debts by debasing the currency and defaulting through the back door
Problem 1 = People are already in too much debt and price rises have a disproportionate effect on the poor because they are already struggling to keep their heads above water. Inflation doesn't help these people
Problem 2 = The politicians don't have the wisdom or the courage to tackle the structural problems that won't go away just because they are inconvenient for the election cycle
Central Banking Solution = Our equilibrium models tell us that trickle down exists, that the wealth effect is real, and that economies will behave themselves if we push the right buttons…oh and er…money printing is the only thing we really know how to do…so that's settled then…let's do more of what got us here in the first place…crank her up boys...