Why does anyone listen to these people?
We are being dealt a complete fabrication. Throughout the world, central bankers are being exposed as completely ineffective. Anyone who listens to these individuals has to realize they do not understand what is taking place.
To start, central banks are not banks. They do not do money so to look at them as doing so is a mistake. Instead, they are propoganda organizations that specialize in expectation management.
Secondly, their policies are repeated failures. Anyone who looks at the record over the last 20 years sees it clear as day.
Japan: The Grandfather of QE
While most focus the Fed, quantitative easing is over 20 years old, started by the Bank of Japan. The Japanese closed out the lost decade by listening to Paul Krugman and his idea of "credibly promise to be irresponsible". Krugman's idea was to hit the Japanese economy with massive stimulus (read money) to kickstart it.
This was an answer to the liquidity trap the Japanese found themselves in. Since there were no expectations of inflation, the central bank had to create it. So by providing markets with massive liquidty with trillions of Yen, the result would be the expectation of inflation which, according to Krugman, would lead to that end.
Before the COVID situation, the BoJ embarked upon 27 QE programs. To contrast, the Fed went down the path 5 times.
Yet, with trillions in supposed Yen entering the economy, inflation should be through the roof. Sadly, this did not happen. Failure after failure meant that more had to be added. There was no way to admit the programs were not working.
A decade ago, we were hit with Abenomics which was also going to bring upon the end to the Lost Decade for Japan. Of course, we now know the decade became 3.
The reality is that trillions in Yen was not poured into the market. If that was the case, there whould have been an impact instead of total failure.
So where was the disconnect? It all comes back to central bankers (and many economists) believe that reserves are important. They are not. The BoJ printed trillions of Yen worth of reserves, not Yen. As we repeatedly espouse, under fractional reserve banking, the commercial banks are the ones who create the currency, aka legal tender.
Central bank liabilities, outside banknotes and coinage, are not legal tender.
The Fed
Not to be outdone, the Fed had to join the party. They started after the Great Financial Crisis. After all, central bankers cannot sit back and do nothing. They are the ones who control the economy with their mastery of matters we cannot understand. Or so we are told.
Of course, this happened under Ben Bernanke, who was Fed Chair at the time. It is only in his later years that Uncle Ben got a bit more honest.
Ben Bernanke, who led the US Federal Reserve during the global financial crisis, observed that the art of setting monetary policy was 98 percent talk and 2 percent action.
There you have it. He is basically admitting that the Fed's role is to "talk" about policy. In other words, expectations management.
So their policies never really do much, as admitted by the former chair.
Nevertheless, the Fed embarked upon more failed QE just like the BoJ, trying to outdo the failure of its counterpart.
Sadly, for the economy and, worse, the labor market, the Fed was dealing in blanks just like the BoJ. The Fed doesn't do money either. They produce reserves that are not in the economy. Liquidity is not liquidity if it doesn't go anywhere.
Trillions of dollars are going on the balance sheets of commercial banks yet cannot be used for another else other than raising the potential lending ceiling (which the Fed eliminated in 2020 anyway).
Failed Policies Affecting The Working Class
John Maynard Keynes once stated that deflationary money is an evil which suffers labor first and foremost. This is what the world suffered under over the past decade.
We now have Be Bernanke, Haruhiko Kuroda, Janet Yellen, and, now, Jerome Powell who followed the same failed playbook. They all promised money yet do not create it. This led to deflationary money that affects labor the most.
Is it any coincidence that the workforce participation rate is down a great deal over the last 20 years?
Throughout this, most people simply accepted the central banks were printing massive amounts of money. The reality is that, if it were the case, the last 20 years would have been different. Ironic that the BoJ and Fed finally got their price increases at the same time: 2020.
What took place then? Global lockdowns and shutting down ot the global economy.
Central bank policy had nothing to do with it.
Since 1937, banks knew that reserves meant nothing. Yet central banks keep returning to the same playbook pretending they have an impact.
The reality is central banks do nothing more than try to manage expectations and get markets to do what they cannot do. That is where Bernankes 98% bullsh*t, err talk, comes in.
This is the core of central bank insanity.
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