{"id":45405,"date":"2019-04-15T12:55:33","date_gmt":"2019-04-15T17:55:33","guid":{"rendered":"https:\/\/olduvai.ca\/?p=45405"},"modified":"2019-04-15T12:55:37","modified_gmt":"2019-04-15T17:55:37","slug":"no-fix-for-recession-without-a-financial-crisis-theres-no-central-bank-policy-fix","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=45405","title":{"rendered":"No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix"},"content":{"rendered":"\n

No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix<\/a><\/h3>\n\n\n\n

There are no extreme “fixes” to secular declines in sales, profits, employment, tax revenues and asset prices. <\/em><\/p>\n\n\n\n

The saying “never let a crisis go to waste” embodies several truths worth pondering as the stock market nears new highs.<\/strong> One truth is that extreme policies that would raise objections in typical times can be swept into law in the “we have to do something” panic of a crisis.<\/p>\n\n\n\n

Thus wily insiders await (or trigger) a crisis which creates an opportunity for them to rush their self-serving “fix” into law before anyone grasps the long-term consequences.<\/p>\n\n\n\n

A second truth is that crises and solutions are generally symmetric:<\/strong> a moderate era enables moderate solutions, crisis eras demand extreme solutions. Nobody calls for interest rates to fall to zero in eras of moderate economic growth, for example; such extreme policies may well derail the moderate growth by incentivizing risk-taking and excessive leverage.<\/p>\n\n\n\n

Speculative credit bubbles inevitably deflate, and this is universally viewed as a crisis,<\/strong> even though the bubble was inflated by easy money, fraud, embezzlement and socializing risk and thus was entirely predictable.<\/p>\n\n\n\n

The Federal Reserve and other central banks are ready for bubble-related financial crises: they have the extreme tools of zero-interest rate policy (ZIRP), negative-interest rate policy (NIRP), unlimited credit lines, unlimited liquidity, the purchase of trillions of dollars of assets, etc.<\/p>\n\n\n\n

But what if the current speculative credit bubbles in junk bonds, stocks and other assets don’t crash into crisis?<\/strong> What if they deflate slowly, losing value steadily but with the occasional blip up to signal “the Fed has our back” and all is well?<\/p>\n\n\n\n

 \u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix There are no extreme “fixes” to secular declines in sales, profits, employment, tax revenues and asset prices.  The saying “never let a crisis go to waste” embodies several truths worth pondering as the stock market nears new highs. One truth is that […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[127,3203,312,1849,534],"class_list":["post-45405","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith","tag-credit-bubble","tag-financial-crisis","tag-financial-markets","tag-monetary-policy"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=45405"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45405\/revisions"}],"predecessor-version":[{"id":45406,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45405\/revisions\/45406"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}