The post is somewhat alarmist, but it makes the point that propping up overvalued assets is not a viable long run strategy — without what Smith doesn't add, adding a sufficient inflationary bias. But in a disinflationary or deflationary environment, which is when massive liquidity injection is needed as well as artificial market support, there are limits to central banks as the lender and market-maker of last resort. This is an issue as developed economies become increasingly financialized.
Here we are over five years since the financial crisis, and the issues are not yet resolved enough for central banks to pull back their special operations in support of a still teetering system that is rotting at the periphery and flagging at the middle.
The Wall Street Examiner
The Federal Reserve’s Nuclear Option: A One-Way Street to Oblivion
Charles Hugh Smith
2 comments:
What on Earth is the point of printing money and buying assets? If stimulus is needed, why not print money and raise public spending, or feed money into household pockets, via tax cuts?
Supposedly to save the banks and financial system, which is fundamental to a capitalist economy. Also to prevent debt deflation from setting in and resulting in a depression. Ancillary is saving the investor class that supposedly supports capitalist production.
The rest? Peripheral under capitalism, the idea being that the market is best to sort it out from the rest.
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