The Phaserl


Are Central Bankers Coming to a Bitter End?

by Martin Armstrong, Armstrong Economics:

Central bankers these days are seriously trapped. They cannot now reverse their policies for that means they have to admit that they have failed. This is why the Yellen is not so eager to move to negative rates and has continued to take the view that rates must be normalized (raised). That is far more serious than you might imagine. To even entertain backing down from negative interest rates means they have to admit that Keynesian/Marxist economics has completely failed and therein socialism, which is based upon the very principle that government CAN and is CAPABLE of managing the economy. This is the real question presented in the American presidential elections, yet nobody will articulate it in this manner. Hillary still preaches the same failed socialist agenda as if government can even do anything other than attack people who earn more money as did Emperor Maximinus of Rome, but pretend to give it to those who produce less.

Just before Paul Volcker became Federal Reserve Chairman (August 6, 1979 – August 11, 1987), he delivered his Rediscovery of the Business Cycle in 1978 (published on May 3, 1979 hardback). If you Google this book, you will see our site comes up first. You can find used copies around $500. Why is this book so rare? Because before Volcker became Fed Chairman, he told the truth.

“The Rediscovery of the Business Cycle – is a sign of the times. Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’ had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment.”

This “New Economics” was all about empowering government to manipulate and control the economy. Even Larry Summers, who is the father of Negative Interest Rates, has publicly admitted that government cannot forecast economic declines. Implicitly, he too is conceding that the “New Economics” has failed and his negative interest rates is now bankrupting pensions and has underwritten government debt like never before. Summers has pushed society over the edge. The conundrum in which we now find ourselves is where global central bankers can gather at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, but all they can do is hope something happens to save them.

Governments are beginning to abandon the grip of austerity forced upon Europe by Merkel, which has greatly suppressed economic growth and created an economic depression exactly as what took place during the 1930s. The option of deliberately creating deflation was the policy of Germany only because they misunderstood the causes behind the German hyperinflation of the 1920s. Germany has blamed simplistically the quantity of money rather than the collapse in confidence due to the communist revolution creating the Weimar Republic. The failure of the economy to rebound in Europe and in Japan, while the United States has been only a dead-cat-bounce, led to governments insisting politically that central banks maintain and extend their own stimulus efforts. Politicians are incapable of managing the economy so today they look to the central bankers – tag you’re it.

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2 comments to Are Central Bankers Coming to a Bitter End?

  • anon

    I don’t harbor any ill-will toward anyone, however, what DOES NEED TO COME TO A BITTER END, is the “Fed” control over America’s currency, which should be a CONSTITUTIONAL INTEREST-FREE CURRENCY.

    • Ed_B

      Amen to that, Bro. Constitutional money is HONEST money while fiat is inherently dishonest money. No wonder that politicians and banksters flock to the money that suits them best. 🙁

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