Naturally, at any point monetary accommodation is removed, an economic, and market downturn is almost immediate. This is why it is feared central banks do not have enough tools to fight the next recession. During and after the financial crisis, they responded with a mixture of conventional interest-rate cuts and, when these reached their limit, with experimental measures, such as bond-buying (“quantitative easing”, or QE) and making promises about future policy (“forward guidance”).
The trouble currently is that global short-term interest rates are still close to, or below zero, and cannot be cut much more, which has deprived central banks of their main lever if a recession strikes.
The Fed is trapped. Read More …
Opinion: The Fed is trapped because it cannot raise interest rates to unwind the $4 trillion debt it created from the last three rounds of money printing. When the Fed announced 4 interest rates increases in 2018, the global market dropped 20% until the Fed capitulated and began lowering rates.
- If/when inflation returns the Fed will be unable to raise rates
- If/when the economy enters a downturn the Fed will be forced to lower rates
Perhaps that is why the headline from Wednesday is so important:
BOE, BOJ, ECB, BOC, BIS to meet to discuss a central bank digital currency
- Bank of England
- Bank of Japan
- European Central Bank
- Bank of Canada
- Swiss National Bank
- the Bank for International Settlements
They’ll all be meeting, and “pool research and experiences” to develop a central bank digital currency (CBDC).
- In the 1920’s paper money became monopolized by the Federal Reserve bypassing private banks
- In 2020 direct deposits at the Federal Reserve would be close to being default and liquidity risk free.
- No need to worry about whether your bank might fail
- No need to withdraw cash if you were worried about a bank in crisis
- The government would have all the financial data on everyone
- Digital currency would then have traveled from libertarian choice to Big Brother
“Thus he said:
‘The fourth beast shall be
A fourth kingdom on earth,
Which shall be different from all other kingdoms,
And shall devour the whole earth,
Trample it and break it in pieces.” Daniel 7:23