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Tuesday, October 22, 2019

"We're Being Robbed" - Central Bank 'Stimulus' Is Really A Huge Redistribution Scheme

When an economy turns from expansion to contraction there is an order of events. The first signs are an unexpected increase in inventories of unsold goods, both accompanied with and followed by business surveys indicating a general softening in demand. For monetarists, this is often confirmed by an inverting yield curve, which tells them that at the margin the short-term rates set by the central bank are becoming too high for business conditions.

That was the position for the US 10-year bond less the 2-year bond very briefly at the end of August, since when this measure, which is often taken to predict recessions, has turned mildly positive again. A generally negative sentiment, fueled mainly by the escalating tariff war between America and China, had earlier alerted investors to an international trade slowdown, expected to undermine the American economy in due course along with all the others. It stands to reason that backward-looking statistics have yet to reflect the global slowdown on the US economy, which is still buoyed up by consumer credit. The German economy, which is driven by production rather than consumption is perhaps a better guide and is already in recession.

After an initial hit, a small recovery in investor sentiment is understandable, with the negative outlook perhaps having got ahead of itself. But we must look beyond that. History shows the combination of a peak in the credit cycle and tariffs can be economically lethal. A brief return to a positive yield curve achieves little more than a sucker rally. It may be enough to put further monetary expansion on pause. But when that is over, and jobs begin to be threatened, there can be no doubt that central banks will ramp up the printing presses.

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4 comments:

Anonymous said...

And the Democrats are not? Why do you think they give these Democrats al this money during elections?

Anonymous said...

456
This is about the economy and the currency.
Dems and Repubs don't matter.
The politicians "work for" the bankers, not the other way around.

The bankers are creating more US Dollars (and Euros, and Yuan, so on).
This is evil on a massive level.
As Ron Paul used to say, the Fed is stealing the fruits (US Dollars) of our labor.

They are simple thieves who have the power to print currency.

Anonymous said...

I agree with that

Anonymous said...

The circle of corruption continues.