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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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From: Eva2/16/2011 2:17:02 PM
3 Recommendations   of 4904
 
update -- trotsky, 13:54:58 02/16/11 Wed
The Illusion of Control

Mervyn King just had to fire off another 'Dear Chancellor' letter. CPI and RPI continue to climb way beyond the official central bank 'target' in the U.K., even while the BoE keeps its administered rate at 0.5% and engages in outright money printing.
The ultra-loose policy King supports will in the end bring about the exact opposite result of that desired - instead of helping the economy, it will damage it even further. There are in fact worrisome signs that the pool of real funding of the UK economy has already been terminally damaged in the last boom. If so, then no amount of money printing and arm waving will create even a temporary illusion of prosperity.
This should be a warning to Bernanke and the easy money camp at the Fed, but it seems likely that it will be ignored. Kyle Bass of Hayman Capital meanwhile reminds everyone that the systemic risk from the debtberg has not disappeared - it has merely changed ownership. The current trajectory of government debt growth strongly suggests that the irresponsible monetary policy of the BoE will become the rule rather than the exception nearly everywhere in the developed world. The situation seems intractable enough that one is reduced to pondering what form the eventual defaults will take. One thing is already certain: It will turn out that we can not get something from nothing after all - the old Keynesian fantasy of 'turning stones into bread' by lowering the interest rate to zero and printing gobs of money is about to with the harsh facts of reality. The central banks think they are in control of the process - but that is likely a dangerous illusion as well.
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