Central Bankers’ Desperate Grab for Power

Ellen Brown 22/09/2019
Central bankers are out of ammunition. Mark Carney, the soon-to-be-retiring head of the Bank of England, admitted as much in a speech at the annual meeting of central bankers in Jackson Hole, Wyo., in August.

“In the longer-term,” he said, “we need to change the game.” The same point was made by Philipp Hildebrand, former head of the Swiss National Bank, in a recent interview with Bloomberg. “Really, there is little if any ammunition left,” he said. “More of the same in terms of monetary policy is unlikely to be an appropriate response if we get into a recession or sharp downturn.”

“More of the same” means further lowering interest rates, the central bankers’ stock tool for maintaining their targeted inflation rate in a downturn. Bargain-basement interest rates are supposed to stimulate the economy by encouraging borrowers to borrow (since rates are so low) and savers to spend (since they aren’t making any interest on their deposits and may have to pay to store them). At the moment, over $15 trillion in bonds are trading globally at negative interest rates, yet this radical maneuver has not been shown to measurably improve economic performance. In fact, new research shows that negative interest rates from central banks, rather than increasing spending, stopping deflation and stimulating the economy as they were expected to do, may be having the opposite effects. They are being blamed for squeezing banks, punishing savers, keeping dying companies on life support and fueling a potentially unsustainable surge in asset prices.