Central banks killing capitalism
Central banks killing capitalism

The central banks are distorting markets and maintaining artificially high asset prices. Apparently this is for our own good. Heaven forbid the prudent amongst us should purchase assets from the imprudent at prices which enable us to service any loans required for the purchase, while making a profit:

Dear EBA, the central banks and emerging markets have got this: The extension of central bank liquidity eased the pace of asset-shedding observed in late 2011, but did not turn the underlying trend. If the banks in the EBA sample, for instance, failed to roll over their senior unsecured debt maturing over a two-year horizon, which amounts to more than €1,100 billion (€600 billion among banks with a capital shortfall), they would have to shed funded assets in equal measure. By covering these funding needs, the LTROs and dollar swap lines helped avert an accelerated deleveraging process. But many banks continued to divest assets in anticipation of the eventual expiration of these facilities. Banks are also mindful that a sustained increase in their capitalisation would facilitate both regulatory compliance and future access to the senior unsecured debt market. The BIS paper available here.

Any surprise the banks are not lending money? There is a shortage of demand from those they believe will be able to repay it. The shortage will remain until such time as asset prices fall to a level reflective of their value or their profit generating capacity rises to better reflect their price. Central bank and other government measures stopping defaults and declining asset values are stopping this from happening.

The economics literature is stuffed full of material on the detrimental effects of sticky prices. For example, how inflexible labour markets slow an economy and increase unemployment. Exactly the same phenomena is observed with sticky inflexible asset prices. They slow an economy and result in unemployed assets and hence labour. It beggars belief that a bunch of central bankers so in thrall to the nostrums of mainstream economics are not across this possibility. At least it would be if we did not have documented evidence of how out of touch they are.

Timing can make all the difference in life. Maintaining real wages with job security can initially seem to mitigate any downturn. Those employed continue to earn a good income, they maintain demand and asset prices. Over time the rigid economy develops an insider/outsider phenomena and may come to resemble the British economy prior to Thatcher.  It becomes sclerotic and does not engender much growth or increase in living standards.The rigidities and distortions caused by government interventions “for the good of the people” cause ever more crises.  The government in turn intervenes to mitigate these effects – a nationalization here, a price control there, a regulatory barrier somewhere else. Before you know it there are zombies everywhere. High unemployment and low or negative income growth are the norm.

Meanwhile the economy with a more flexible labour market may initially plunge faster and further. But eventually assets become bargains, then they become better than bargains. They get snapped up and put to work, growing the economy and wages from a firm less leveraged foundation. Before too long the country with the more flexible economy is outperforming the one rife with sticky prices and government interventions. People are employed and their real incomes rising.

The problems in the economy subject to central bank and other government initiatives to induce price rigidity are inevitable. Also inevitable is the pain and suffering inflicted on many of the least able in society as described here. While penalizing many of those in most need, central bank measures also penalizes those holding the cultural values most amenable to wealth generating capitalism. The bourgeois middle class. If ever there were grounds for abolishing the Fed and other central banks, it is their susceptibility to these sorts of policies. If they keep it up much longer, it may not just be their jobs at stake.



18 Comments
  1. 553295 585554Greetings! This really is my very first comment here so I just wanted to give a quick shout out and let you know I genuinely enjoy reading by means of your weblog posts. Can you recommend any other blogs/websites/forums that deal with exactly the same topics? Thank you so significantly! 613984

  2. 60536 985702Yeah bookmaking this wasnt a risky determination outstanding post! . 641891

  3. metasearch

    The Road to Hell is Paved with Good Intentions

  4. nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort nationwide home comfort

  5. No better a kook bigger than the internet from Don Tigert, sala rodd sala rodd, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home

  6. 529172 705725Yeah bookmaking this wasnt a risky determination outstanding post! . 154754

  7. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  8. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  9. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  10. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  11. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  12. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  13. No better a kook bigger than the internet from Furniture From Home, BRIAN WILLIS Brockstar, BROCKSTAR BY BRIAN NELSON WILLIS, Richard Ellenbogen – Beverly Hills Body,LuxSauna, Alan Symons, park ward, nationwide home comfort, AGS Capital and kaonsoftware and the kind. Poggi, Michael Michael Poggi Poggi’s Animal House like.Elite Client Services – Private Client Management Group TRUSTED as well. Furniture From Home Beverly Diamonds Elite Client Services – Private Client Management Group TRUSTED Mountain Business Center LLC, Rebecca Bextel

  14. 813978 288250Some truly marvelous work on behalf of the owner of this web website , dead fantastic subject matter. 754622

  15. BROCKSTAR BY BRIAN NELSON WILLIS SFO probes US lender over missing millions Brockstar Finance

  16. BROCKSTAR BY BRIAN NELSON WILLIS SFO probes US lender over missing millions Brockstar Finance

  17. 368630 628791This design is spectacular! You obviously know how to keep a reader entertained. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Wonderful job. I really enjoyed what you had to say, and more than that, how you presented it. Too cool! 181097