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Central Bankers And Einstein’s Definition Of Insanity

September 14, 2016

“Insanity: doing the same thing over and over again and expecting different results.” -Albert Einstein

Central banks are doing everything in their power to try to boost their weak economies right now. The amount of global QE is staggering and totally unprecedented.

Financial markets have certainly responded well in recent years but these extraordinary policies haven’t had anywhere near the intended effect on the global economy. Why is that?

Jeff Snider makes a compelling case by explaining, “There is no money in monetary policy. The ‘clogged transmission channel’ isn’t clogged at all, it just doesn’t exist.” In short, so called “shadow banking” has taken effective control of the global monetary system while central banks have remained wed to outdated frameworks.

Then again, it could just be that central banks’ ability to inspire greater and greater debt creation has simply reached its limit.

Consumers are now up to their eyeballs in debt…

…as are corporations.

Maybe they ought to start asking a very simple question before engaging in any further extreme policy: “Does it work?”

In that light, there simply is no evidence at all that extraordinary monetary policy does any good whatsoever.

Perhaps a more important question to ask then is: ‘What are long-term consequences of explicitly boosting asset prices and debt creation in such a massive way without achieving any concomitant boost in underlying economic fundamentals?’

Related:

The Greatest Money Manager Alive Attributes The Majority Of His Success To Just This One Thing

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