10/14/2014 - Central Bank Financial Repression Leading to Bubble Liquidation and Industrial Deflation
In his latest essay, David Stockman* explains how after decades of financial repression, central banks have created huge distortions & imbalances in the global economy – now they are coming home to roost .. the impossibility of zero interst rate policy (ZIRP) forever on central bank money printers is beginning to be recognized .. “Long-standing financial repression and absurdly low interest rates have generated malinvestments and debt burdens that are crushing enterprise and true economic risk-taking throughout the world economy. In the DM (developed market economies), the resulting malady is consumer balance sheets that are bloated with debt; and in the EM (emerging markets) the ill takes the form of vastly bloated industrial capacity and public infrastructure. So if there were ever a case of ‘physician, heal thyself’, this is it .. There has been no escape velocity owing to Keynesian stimulus. Massive central bank liquidity injections have remained in the canyons of Wall Street and other major financial markets where they have enabled endless free money funding of speculation and carry trades, but have contributed virtually nothing to spending by debt-saturated households.”
