BS from the BIS leads to questions for Germany

Jack discussed it yesterday: the Bank of International Settlements (BIS) said we have no reason to worry about central banks' finances. In fact: they said the only thing we do need to worry about is wrongly worrying about central banks' finances.

Just combing through the Overview & Conclusions page of their recent paper gives us every reason to worry that the re-education of the proles has taken an openly global tack. (New world order, anyone?)

They are attempting to desensitize the populous so that the natural reaction to danger, to risk, to damage, is surpressed. It's much like being given medicine to stop a fever, which is the body's natural reaction to fight infections.

Why? Why would they ... would they do such a thing?

The same reason these elitist organizations do anything: they're ignorant or they're control freaks or they're both. But my money is all on control freaks; though now that I think about it, totalitarian jackanapes has a nicer ring to it.

Controlling the people makes it quite easier for them to execute their schemes. In this instance, it seems the BIS is providing cover to central banks who, when push comes to shove, are at the mercy of governments and taxpayers (assuming the taxpayers aren't already innoculated by that time.)

But honestly, if the BIS is to be taken seriously, when would central banks ever be at the point where they must seek emergency support from taxpayers? After all, the central banks' finances don't matter, right?

Well, they may matter if the banking system over which they reign is so thoroughly leveraged up, leaning on crummy collateral and even worse economic fundamentals, that the central bank must resort to a government (i.e. taxpayer) whose resources are exhausted.

What do you think? Any countries (or groups of countries) come to mind?

The eurozone certainly fits the bill.

The European Central Bank has, on a relative basis, been reluctant to cut interest rates. That's likely because the ECB is largely steered by Germany who made a lot of effort to establish a prudent Bundesbank. 

But the ECB just cut rates and emphasized the potential for even more rate cuts if needed.

They also are now talking about using asset-backed securities (ABS) purchases, among other tools, to "stimulate" the eurozone economy. As we well know, this, like so many monetary experiments before it were, will be aimed at producing lending activity in the real economy.

Don't laugh. Read the Bloomberg Business Week article -- it's in there.

So one has to wonder about the convenient timing here. The BIS is basically reassuring Germans (and the world), against their natural reactions, that these renewed stimulus efforts by the central bank are nothing to be ashamed of -- the European Central Bank will be fine and Germany will be safe from bearing the undue burden of fellow Eurozone members.

Germany -- what say you?

Are you okay with this? Are you okay with the fact the common currency union has evolved into a socialist dreamworld from which there is no escape? Are you okay with the fact that the ECB is now going to follow the footsteps of the Fed, BOJ et al so that when things really get ugly they'll be able to say "We're trying our best, and we can't do it alone" -- will you be okay with that? Will you be okay when you're being forced into a fiscal union made up of a bunch of exhausted taxpayers because that is the only way the ECB will be able to take on the form of a glorified lender of last resort?

Or will this be a moot point because the Fed and the BOJ are now leading the entire world into a phase of destabilizing monetary stimulus efforts that will create hot money flows that economies around the globe cannot manage?

We learned today that none other than China (again) is currently battling capital flows that could potentially impact its growth expectations. 

Or will this be a moot point because investors will soon grow tired, the proles will catch on to the fact that the real economy is seeing no meaningful benefits from monetary stimulus and these have-nots living paycheck-to-paycheck realize they are losing out even more to the haves living in the stock market?

We know bank reserves at the Fed continue to build up. We know the velocity of money continues to fall. We know any recovery in the US lending market has been measly. We know employment is not making meaningful strides. 

In other words: we've come down with a pretty serious fever as we try to push back against monetary infection. Just what do they intend to do next so that we feel like we're no longer at risk of serious illness?

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