Anyone that does any macro thinking at present surely arrives at some very strange states of new realities. One small example. Central banks, given unlimited powers, will be the ultimate buyer of all assets. Given Nirp (negative interest rate policy) and a constant high bid on the order books by the buyer of last resort (central banks) private citizens will always sell eventually as the bid goes up. Some will sell earlier than others but ultimately all will sell.. So the nik225’s etfs are currently 52% held by the boj but eventually they will all be held as the bid increases or rather the bid is sustained as economic activity slides. Relatively the bid is increased even if nominally it is going in reverse. The ratio of ownership marches ever onward.
And as it does how are corporates managed? Who are they managed for? For central banks benefit? How do you reverse this policy? How will shareholder’s meetings conducted? Who at the central bankers that sit on the boards and how does he make decisions? And how do you measure his performance? And in whose interests is he really working? What are his objectives and who decides them? Surely as the central banks desire money supply to grow they will vote on the corporate boards to increase debt and invest in the means of production? Is this the BOJ’s strategy? That you take over corporate japan and drive money supply growth via the ownership interest you have accumulated?
What about pensioners? And what about savings? In a society of nirp are we saying that savings are not needed or to be encouraged? Are we saying that central banks and government are our future protection. That self protection is no longer necessary? And if savings offer no returns how do people retire? Are we saying that all pensioners should work?
I’m at a loss.. the conclusions you draw are inevitably chaotic. “Brave new World” etc awaits us it seems..
I grew up in a time where universally communism and socialism were seen to have failed societies. That they were proven not to have worked. That where ever central planning had been attempted it had failed. That the market and self interest was proven to be the best at allocating resources. That even within the provision of social welfare limited markets and competition was to be encouraged an enabled. History showed this was the only way to prevent corruption, waste and stagnation.
Somehow we have gone full circle. Central planning is now seen as the best way, the market is seen as bad, self interest and self protection are seen as bad. Deficits are good and surpluses are bad. Shareholder interest is bad and central government is good. Equality carried to its logical conclusion means we are all equal. As my gardener told me when i directed him to do something last week. “I don’t need a boss Richard”. We are all equal, hierarchy is out, equality is in.
My point here is that central banks are changing our societies, no one asked them too but they are. Their temporary emergency measures a decade late are still in force and increasing in size. Our temporary wars are also increasing in size and scope. Whether the two are correlated i suspect they are but that is not the point here i want to make. The point here is that some un-elected people are busy creating a brave new world. A centrally planned world that history tells us has never worked before and their ambitions usually end very badly.
Nonetheless as these people have power at present it is certainly worth considering the elements of this new world they are busy creating.
Rich
(8 votes, average: 5.00 out of 5)
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