For the fourth time in as many years, Federal Reserve Chairman, Ben Bernanke, last month attempted to wean bankers and investors off of ‘free money’ Quantitative Easing (QE) and near zero interest rates the US central bank has been providing them since the 2008 financial crash. In June Bernanke announced his plan to slow sometime in the future the current $85 billion a month Fed QE money injection and to start raising interest rates again. In response, as three times before in 2010, 2011 and 2012, the investor class (bankers, shadow bankers, speculators, et. al.) quickly went into near cardiac arrest over just the possibility of the free money spigot being turned off some months down the road.
As this writer noted in a March 2012 contribution to this blog, ‘Are Capitalists Becoming Addicted to Free Money?’, central bank monetary policies (QE and zero rates) for the past five years now has resulted in banks and investors becoming increasingly dependent—indeed addicted–to the continuation of the $20 trillion thus far ‘crack cocaine’ money injection by central banks worldwide.
When this past June 20 Bernanke announced the Fed would consider slowing the $85 billion a month sometime in the future, he was perhaps growing increasingly concerned the past five years of free money to bankers and investors—along with similar actions by the Bank of England, European Central Bank, and recently Bank of Japan—was destabilizing the global economy and actually slowing economic growth.
Financial asset markets in the US and globally responded negatively to the Fed’s June announcement almost immediately. What resulted was a virtually overnight rapid asset price deflation. Stock markets worldwide, sovereign and corporate bond markets, real estate investment trusts, money market funds, emerging market and exchange traded funds, commodity prices, gold, etc.—all began to plummet in the days that followed in response to even the mere possibility of a retraction of the central bank free money gusher.
If the matter wasn’t so serious—proving that global capitalist policy makers’ primary policy tool these past five years is a confirmed, bona fide failure—it would be comical. Central bankers everywhere—Bernanke in the US, Mario Draghi in Europe, Carney in England, and Kuroda in Japan—have been desperately plowing money into bankers, investors and speculators worldwide for the past five years in the vain hope they might actually use some of it to create jobs and stimulate the real economy. But they haven’t. And they won’t. Moreover, it is becoming increasingly clear that the money ‘fix’ is making the patient actually more ill—setting off currency wars, reducing income and consumption, diverting finance from real investment, destabilizing Asia and emerging markets, increasing speculation in sovereign debt in Europe, etc. So Bernanke, as leader of the most influential central bank, put his toe in the water once again and even more quickly pulled it out once again. In the past two weeks, Bernanke and his governors have trotted out, one after the other, to tell the media ‘no, we really didn’t mean it; the free money will continue’. And ‘voila’! There go the stock and bond markets, real estate, derivatives, foreign exchange, emerging market funds, and other markets continuing their march once again to ever higher levels.
What the events of the past month show unequivocally is that central bankers worldwide have become the tail on the global investor-speculator dog, and no longer the dog-trainer they thought they were. The dog has clearly trained the trainer.
Given this somewhat comical scenario of central bankers running to and fro to please their respective investor classes, this writer, laughing at the comical scenario of central bankers in near panic, wrote the following little rhyme for them and investors everywhere, to be sung to the tune of the children’s song of ‘Three Blind Mice’. Here goes:
“THREE BLIND BANKER MICE
3 blind banker mice
3 blind banker mice
See how they run (QE)
See how they run (for free)
They all bailed out their investor class
And left the rest of us flat on our ass
Trillions for their bankster lice
Stocks & bonds, derivatives…so nice
Did you ever see such a sight in your life (yes)
Let’s cut off their b***s with a butter knife
3 blind mice
3 blind mice”
July 14 (Bastille Day ya’ll), 2013