Saturday 14 April 2012

What if Central banks Fail?


This is a long document but maybe worthwhile the effort. I have provided a link.

El-Erian Breaches The Final Frontier: What Happens If Central Banks Fail?
"In the last three plus years, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others do the sustainable to restore sustainability!" -  Pimco's El-Erian


12 April, 2012

In a lecture to the St.Louis Fed, the moustachioed maestro of monetary munificence states:


"let me say right here that the analysis will suggest that central banks can no longer – indeed, should no longer – carry the bulk of the policy burden


and:

"it is a recognition of the declining effectiveness of central banks’ tools in countering deleveraging forces amid impediments to growth that dominate the outlook. It is also about the growing risk of collateral damage and unintended circumstances."

It appears that we have reached the legitimate point of – and the need for – much greater debate on whether the benefits of such unusual central bank activism sufficiently justify the costs and risks.

This is not an issue of central banks’ desire to do good in a world facing an “unusually uncertain” outlook. 

Rather, it relates to questions about diminishing returns and the eroding potency of the current policy stances. The question is will investors remain "numb and sedated…. by the money sloshing around the system?"

To read the entire lecture please GO HERE

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