Something has dramatically changed in the establishment’s view of central banking… and of the future.
As we reported earlier this week, recently we have observed a surprising spike in criticism of central banks by establishment figures, in some cases central bankers themselves, most notably Mark Carney who last Friday remarkably admitted that very low interest rates tend “to coincide with high risk events such as wars, financial crises, and breaks in the monetary regime” when he also urged an end to the dollar’s status as world reserve currency. This continued when 7 months after it praised negative rates, the San Francisco Fed pulled a U-turn and warned that the “Japanese experience”, where negative rates dragged down inflation expectations even more, is ground for NIRP caution.
There has never been so much hostility against central banks – even among other central bankers – – in the past decade as over the past month. Something is about to snap
Meanwhile, as the FT concluded in its summary of last week’s Wyoming outing, “there was a sense that things will never be the same again” and quoted St Louis Fed President James Bullard, who wrote that “the developed world had experienced a “regime shift” in economic conditions: “Something is going on, and that’s causing I think a total rethink of central banking and all our cherished notions about what we think we’re doing,” Bullard admitted. “We just have to stop thinking that next year things are going to be normal.”
Tying it all together was Bank of America, which in anreport meant to recommend buying gold, lashed out at the Fed, warning that “ultra-easy monetary policies have led to distortions across various asset classes”; worse – and these are not our words, but of Bank of America…n:
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