BIS Slams The Fed: The Solution To Bubbles Is Not More Bubbles, It Is Avoiding Bubbles In The First Place
On one hand there are hard-core Keynesians who will wave the flag of inflation as the only cure to a world drowning in debt, even after the mushroom cloud results of their policies going off around the globe “assure” GDP hits +? once every window in the world is shattered and has to be replaced…
… on the other, you have the BIS which with every passing day is becoming the citadel of Austrian thought, the latest example thanks to the BIS’ most recent quarterly review in which we read that not only is deflation not the “monster” the Bank of Japan and other Keynesian acolytes would like to make it appear…
The evidence from our long historical data set sheds new light on the costs of deflations.It raises questions about the prevailing view that goods and services price deflations, even if persistent, are always pernicious. It suggests that asset price deflations, and particularly house price deflations in the postwar era, have been more damaging. And it cautions against presuming that the interaction between debt and goods and services price deflation, as opposed to debt’s interaction with property price deflations, has played a significant role in past episodes of economic weakness.
… but more importantly and as Zero Hedge has said from day one, the BIS now says the solution to an asset bubble is not some incomprehensible jibberish of “macroprudential regulation” or a “bubble-busting” SWAT team at the Fed, not another asset bubble (especially not one which leads to house price deflation, the same that is slamming the Chinese economy at this moment), which by now has become clear to all is the only “tool” in a central banker’s aresnal, and the remedy to debt isnot even more debt.
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