CRASH 2: Central Bank intervention is just a ‘let’s try it again’ maneouvre.

Coordinated alchemy doesn’t turn it into science

Sub-atomic theory (or some versions of it) maintain that doing the same experiment over and over again can indeed produce different results. Everywhere else above that level, you get the same result every time; and Einstein thought that even the ‘different results’ syndrome at the sub-atomic level was merely a misunderstanding of the various effects in play.

CERN collider particles or not, I’m with Einstein. Especially when it comes to fiscal and financial trickery. We’ve tried, since 2008, zero rates, quantitative easing, monetarist fiscal discipline, fiscal easing, and endless variations on stability facilities. They’ve all failed, because none of them addressed the fundamental problem: the banking system is intrinsically unstable, and run by mad people who think borrowing is the answer to everything.

Yet still the alchemists in charge insist that, with just One Last Heave, all will be well: that repeating the experiment will, in the end, give us the result we want. This may work in EU referendums when you’re twisting all the right arms. But it doesn’t in fiscal economics.

With today’s news about global central bank intervention now splashed right across the MSM, I am left once again wondering if journalists today have a severe medium-term memory problem….or simply can’t be bothered to look up the history surrounding all this hyperbollocks. Several sites this afternoon GMT referred to the action as ‘unprecedented’.

A little over two months ago – September 15th to be precise – the CBs did the exact same thing as they’ve done today. At the time, it was positioned by many commentators (including this site) as an emergency measure showing just how serious things were. Now, suddenly – ten weeks later – it is our salvation.

Well, it isn’t. The surge in the stock markets is pure speculation, driven by a billion opportunistic trades the minute the central banks released the nature of their liquidity/CD swap loosening intentions. Ten weeks ago, precisely the same thing happened; the effect lasted five days. And what good anyone thinks a surge in stock markets will do for the eurocrisis – apart from enrich those plumbing the depths of liquidity pools around the world – is beyond me. Foreign currency liquidity swap lines are only ever provided when those in charge of the global banking fantasy fear the intrusion of reality. It’s a stopgap measure – nothing more, nothing less: a bit of breathing space for the eurobunglers.

Those dealing with the actual problem are edging forward towards an accommodation with the lenders/bankers/bondholders/markets/headcases. Wolfgang Schauble said in an interview with ARD television in Berlin that the “decisive” answer remains budget discipline enforced by means of European Union treaty change, but he really isn’t that stupid: he knows perfectly well that a guarantor of last resort is what the bondholders seek. This will turn out to be the EU citizen, but as The Slog predicted yesterday, reaching that stage will require obfuscation wrapped in a fig-leaf of dissembling – rebranded as the IMF: finance chiefs of the 17 eurozone members agreed yesterday “to work on boosting the resources of the IMF so it might cooperate more closely with the European Financial Stability Facility”, Luxembourg’s Jean-Claude Juncker lied to reporters late yesterday in Brussels. Or put another way, “we blur the lines such that nobody but us understands WTF is really going on”.

Fifteen months into the so-called ‘critical’ stage of  Europe’s sovereign debt crisis, investors are rushing to leave the eurozone bond market, eurobanks are dumping government debt, south European banks are bleeding deposits….and the economy is descending into a slump. Nobody has run faster from the Black Death than American banks. Now the Fed and others are stepping in to ‘save the eurozone’ – as the FT ludicrously suggested his afternoon. I am not impressed.