Market Vitals: Monetary policy is increasingly damaging!

Monetary policy is increasingly damaging!

We have discussed the limits of monetary policy in the past and believe we are well beyond the limits of its effectiveness; and in fact have delved deeply into the damaging zone.

In a desperate attempt to maintain market liquidity and avoid further deflation of real asset prices, central banks (CBs) are accepting lower quality collateral, endangering their own balance sheets in the process. On top of that, we are still trapped in a severe balance sheet recession (fall in asset value-primarily from real estate-still overwhelms liabilities), coupled with financial repression (the central bank suppressing the front end of the yield curve, paying banks for to hold Treasuries, in order to bolster the their balance sheets).

We often don't think of the social impact of the Fed's policy folly.

Market Vitals | 30 July 2012 [http://blackswantrading.squarespace.com/storage/073012_mv_money_social.pdf] ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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