CENTRAL BANKERS GET PRESURE FROM BANK FOR INT SETTLEMENTS

KING JESUS IS COMING FOR US ANY TIME NOW. THE RAPTURE. BE PREPARED TO GO.

UNDERSTANDING WORLD GOVERNMENT
http://www.womensgroup.org/
http://video.google.com/videoplay?docid=504526035342184251
BANK OF INTERNATIONAL SETTLEMENT PRESS
http://www.bis.org/events/agm2009/pcvideo.htm
BANK FOR INTERNATIONAL SETTLEMENTS PAPER 17 REGIONAL AREAS OF THE WORLD AND CURRENCIES
http://www.bis.org/publ/bppdf/bispap17.pdf
BANK FOR INTERNATIONAL SETTLEMENTS SITE
http://www.bis.org/
G-10 PRESS RELEASES FROM BANK FOR INTERNATIONAL SETTLEMENTS
http://www.bis.org/list/press_releases/said_12/index.htm
BIS ANNUAL REPORTS
http://www.bis.org/list/press_releases/said_10/index.htm
CENTRAL BANKERS SPEECHES
http://www.bis.org/list/cbspeeches/index.htm
BANK FOR INTERNATIONAL SETTLEMENTS-NEW WORLD ORDER-JULY 10,10 HOURS 1 & 2
http://www.olivetreeviews.org/radio/mp3/

THE BANK FOR INTERNATIONAL SETTLEMENTS IS THE CENTRAL BANK OF THE WORLD THAT LENDS ONLY TO CENTRAL BANKERS AROUND THE GLOBE.THE IMF LENDS TO THE COUNTRIES BANKS OF THE WORLD.BETWEEN THIS BANK AND THE IMF I BELIEVE WILL BE THE BANKS OF THE WORLD.THE IMF THE WORLD BANK AND THE POLICEMAN OF THE IMF THE BANK FOR INTERNATIONAL SETTLEMENTS WHERE WE PAY OUT CAP & TRADE,CLIMATE,ENERGY SCAM TAXES TOO TO PAY FOR THE WORLD GOVERNMENT.THE GLOBAL CURRENCY WILL BE THE SDRS OR SPECIAL DRAWING RIGHTS UNTILL THE EU INVENTS THE WORLD MICROCHIP IMPLANT SYSTEM THEN THE EU WILL MAKE ALL TAKE THE IMPLANT OR BE MURDERED.

Central banks

The twilight of the central banker

Jun 26th 2012, 17:28 by R.A. | WASHINGTON-THE ECONOMIST

THE Bank for International Settlements is known as the central bank to central banks. It shouldn't be surprising, then, if the misjudgments common to central bankers are occasionally distilled in BIS analysis into a somewhat curious view of the global economy: one in which heroic, blameless central banks have done their utmost to keep the world economy afloat, in the face of ceaseless governmental incompetence and despite a constant bombardment of baseless outsider criticism. The ability of central bankers to bandage over the harm inflicted by bumbling politicians is limited, warns the BIS in its latest annual report. Unless the world embraces the sober leadership of the wise central banker disaster looms.The annual report is a remarkable document, one which might well come to serve as the epitaph for an era of central banking spanning the Volcker disinflation and the Great Recession—the epoch of the central banker as oracle, guru, maestro. If the end of this era is upon us, we can credit a series of revelations: that central bankers learned the lessons of economic history less well than they'd thought, that they displayed an unfortunate tendency to set aside economic rigour in favour of an obsessive focus on price stability, and (perhaps most importantly) that they are in more need of democratic accountability than is often assumed. Above all, the report captures what may be the most critical error of the modern central banker: eschewing a focus on his proper domain—demand stabilisation—in favour of an arena in which he has no business sticking his nose—the economy's supply side.
Briefly, a dime summary of the report. Nearly half a decade on from the financial crisis, many troubling weaknesses in the global economy remain unaddressed. Deleveraging is occuring dreadfully slowly in many rich countries. "Imbalances" have scarcely been diminished. Monetary policy has propped up economic growth, temporarily buying time for broader structural reforms that governments have failed to deliver. The scope for central banks to do more is limited and the risks of further action are rising. Meanwhile, government debt is a huge threat, particularly given continued problems of undercapitalised banks in some economies. Somehow, governments must return to budget surplus in order to maintain market confidence and create room for future bank rescues, while remaining conscious of the potential blow to growth from dramatic short-term austerity. The immediate future is all sackcloth and ashes.
The overarching theme is quite simple: central banks have done what the economic situation has called for and then some, and they should not and cannot be expected to do much more. Instead, other economic policymakers must finally heed central bankers' recommendations for how to clean up their messes, fiscal, structural, and otherwise. It strikes me as a deeply mistaken view of the state of the world economy and the proper role of the central banker.
At the heart of the BIS' flawed thinking are a number of key misconceptions:
Low interest rates represent accommodative monetary policy. This is a venerable error, also popular during the 1930s. Central banks change the cost of money—the interest rate—in order to clear labour markets. Policy is accommodative not when interest rates are low in absolute terms, but when they are low relative to the market-clearing rate. Economist estimates (including some by Federal Reserve economists using Taylor rules) indicate that for much or all of the period from late 2008 to now the market-clearing interest rate in advanced economies has been negative, substantially so in some cases. Near-zero nominal interest rates (and even moderately negative real interest rates) may therefore represent too-tight monetary policy: money too costly to encourage the spending and investment necessary to achieve full employment.
The BIS argues instead that low rates, taken on their own, are evidence of accommodative monetary policy. In support of the point, it marshals a Taylor-rule analysis that utterly fails the smell test. According to its framework, advanced-economy central banks ought to have raised interest rates steadily from early 2010; on average, benchmark rates should now be above 3%—a recipe for macroeconomic disaster.
"Imbalances" take the onus of macroeconomic stabilisation off central banks. The BIS indulges in this misconception in two ways. First, it deploys the balance-sheet recession argument that overindebted consumers and firms are immune to low interest rates. This is obviously true of many households and businesses but clearly isn't true of all of them. The job of monetary policy is set the policy rate such that cash-flush entities pick up the slack from those paying down their debts. Central banks are there to clear the market, and the statement that there is excess saving in an economy is equivalent to the statement that policy is too tight.
Secondly, the BIS takes the distressingly Hayekian (or Mellonist) view that "malinvestment" during the boom must somehow be paid for in slower growth now:

Because labour and capital do not easily shift across industries, the misallocation of resources during the boom tends to work against recovery in the aftermath of a crisis. Hence, countries where the sectoral imbalances were most apparent are facing higher and more protracted unemployment as their industrial structure only slowly adjusts.

Exhibits A and B for this argument—Spain and Ireland—are fairly lousy examples given the absence in those countries of an independent monetary policy (the BIS might as well argue that countries with no central bank can't rely on a competent central bank to stabilise the macroeconomy). America, the BIS' Exhibit C, reveals the weakness of the argument. America's housing crash began in earnest in 2006, at which point sales, construction, and real-estate employment all commenced plummeting. GDP growth continued, however, and unemployment remained at normal levels until mid-2008, two years later, at which point nominal output began to fall well short of trend and falling employment affected nearly every major industry. Labour and capital shift easily enough when demand follows expectations—when central banks do their job.
Central banks can't do more without confronting unacceptable risks. The BIS cites imbalances as obstacles to effective monetary policy while acknowledging that by pushing unconventional monetary policy further central banks can impact aggregate demand. A host of accompanying risks to such policy suggests they should not, however. What sort of risks?

First, prolonged unusually accommodative monetary conditions mask underlying balance sheet problems and reduce incentives to address them head-on. Necessary fiscal consolidation and structural reform to restore fiscal sustainability could be delayed.

If the central bank does its job, in other words, politicians may not do the things central bankers think they ought to do. Implied in this assessment is that it is the central banker's job to hold elected governments accountable for public finances and supply-side policies rather than the electorate's. This represents both a dereliction of the central bank's duty and an astounding policy overreach. In a similar vein:

[L]arge-scale asset purchases and unconditional liquidity support together with very low interest rates can undermine the perceived need to deal with banks' impaired assets.

In other words, neglect of the central bank's primary duty may be appropriate in order to focus the minds of bank executives and politicians on potential asset losses. Translated, this is effectively the liquidationist view of recovery; if interest rates were higher, advanced economies would be forced into wholesale default, the end result of which would be (assuming society survives the ensuing depression) clean balance sheets.
Other risks of low rates include lower returns for banks and large institutional investors, which may in turn be encouraged to take more risk. Of course, a very low natural rate of interest is the result of excess saving; the central bank's goal is to move its policy rate toward the natural rate in order to mobilise that saving and clear markets. These "risks" are symptomatic of the broader macroeconomic situation and of appropriate central bank efforts to rectify it. True, "financial vulnerabilities" or excesses could result from low rates, but interest-rate policy is an extraordinarily blunt and costly way to rule out such threats, essentially amounting to engineered recession in order to prevent bubbles. Better to use central banks' ample regulatory tools.
Strikingly, the BIS also frets about emerging-market spillovers from rich-world monetary policy. These spillovers are easily overstated. Inasmuch as China has acted as their conduit, by resisting currency appreciation in order to maintain growth (and thereby supporting global commodity demand and prices), spillovers are a key means through which to address those feared imbalances. Chinese inflation has facilitated a real exchange rate adjustment which is chipping away at its chronic current-account surplus and others' chronic deficits. Of course, the BIS also says:

Loose global monetary policy has probably also contributed to the strength of commodity prices since 2009...Commodity prices are set in global auction markets and are very sensitive to global demand conditions, which are in turn shaped by the global monetary policy stance.

This is a nice echo of its exhortation in last year's report that global economic growth must slow. Prices for scarce commodities can't be allowed to clear markets, suggests the BIS. Central bankers should instead engineer a global demand shortfall in order to keep them in check.
(Worries about huge emerging-market capital inflows also look a bit quaint against the backdrop of large outflows from many emerging economies associated with euro-area financial turmoil and the global flight to safety, which troubles are themselves encouraged by inadequate rich-world monetary policy.)
Regrettably absent from this discussion is any attempt at an actual cost-benefit calculation. The BIS seems to acknowledge that central banks remain able to boost aggregate demand. They should not do much more, it is argued, because of the above risks. There are substantial risks to not doing more, however, the most significant of which are the enormous costs of prolonged high unemployment and the eventual structural impairment of an economy suffering from a chronic output gap. One could easily begin with the proposition that central banks aren't out of firepower and craft an entire report on the massive risks of large, persistent output gaps, which demand an overwhelming central-bank response. The BIS behaves as if this dynamic doesn't exist.
Something something fiscal policy. Central bankers have strong views on what governments ought to be doing with their budgets, many of which make most sense when given the least scrutiny. The BIS knows what it wants to say: that fiscal consolidation is almost universally necessary and the only real question is how to pursue it. Picking a path toward this argument that doesn't immediately cave in under the weight of self-contradiction proves to be a difficult task.
The BIS fails to wrestle with the fact that borrowing costs for sovereigns without central banks have risen while those elsewhere have not; it finds itself relying on discredited ratings agencies for assessments of non-euro-zone sovereign creditworthiness rather than market prices. The BIS also dances around a parallel, uncomfortable fact: that austerity within the euro-zone has often enough been associated with falling market confidence and not the other way around. In other words, where markets are least frightened of sovereigns austerity is most easily tolerated, precisely because central banks are free to pick up the slack. And where markets are most reluctant to lend, austerity is almost entirely self-defeating thanks to the absence of a flexible central bank. Over the long-term (which is not the central bank's concern) governments must indeed engage in fiscal consolidation with a particular focus on long-run growth in spending. Over the short- to medium-term, which is the central bank's arena, the story the BIS would like to tell falls apart amid complicating factors. The central bank's best approach is to do its job and let markets and voters hold governments accountable.
Attention is paid in the report to the problem of a safe-asset shortage, but here, too, the recommended action is too simplistic by far. The way to solve the safe-asset problem, the BIS suggests, is through broad austerity sufficient to return many sovereigns to creditworthiness. As noted above, austerity might well prove counterproductive. But it's also critical to recognise that creditworthiness alone is not sufficient to make an asset safe. Market size and liquidity also matter, which limits the pool of sufficiently safe assets to a handful of large economies with deep debt markets backed by independent central banks managing global reserve currencies. And here is the rub, a version of the Triffin dilemma: if those countries begin pursuing austerity they will restrict the supply of new, safe debt, thereby exacerbating the safe-asset shortage. Of course, if they move in the other direction and rapidly raise their annual borrowing, a marginal subset of these economies could move from safe to unsafe status. The broader point is that worldwide fiscal consolidation is not obviously the right choice, and that these fiscal questions are generally more complicated than the BIS lets on.
And then there is this chestnut:

It would be a mistake to think that central bankers can use their balance sheets to solve every economic and financial problem: they cannot induce deleveraging, they cannot correct sectoral imbalances, and they cannot address solvency problems.

This is problematic across the board, but let's just focus on the last bit. Solvency, it is very important to remember, is state-contingent. In a protracted liquidity crisis, the solvent become insolvent. If central banks begin holding nominal growth at levels well below those expected when large debts were incurred, borrowers with a reasonable expectation of solvency ex ante will find themselves insolvent ex post. A central bank is not reponsible for solvency problems that emerge while it keeps to an expected, stable demand path. It does bear responsibility for insolvency that emerges as a result of persistent, preventable demand shortfalls. (And whether a central bank is responsible or not, its decision to provide unlimited liquidity can bail insolvent institutions out of insolvency, potentially leaving the economy as a whole better off provided that moral hazard concerns are subsequently addressed.)
It is entirely understandable that central banks maintain a close interest in fiscal policy. Central bankers would always prefer not to act, and fiscal mismanagement may force them to take corrective steps. That's life, however; the job of the central banker is not to make the central banker feel comfortable. In the extreme, of course, massive government borrowing may force a central bank to act as a lender of last resort on an ongoing basis, with associated loss of control over inflation. I would argue that it is not the central bank's job to prevent such an outcome; accountability must ultimately rest with voters. The euro zone represents a challenge to this rule given the absence of euro-zone-wide democracy. But in general central banks have been entrusted with demand management. Failures of elected officials must be dealt with through the political process, and central bank intervention in such matters represents a dangerous and unwarranted overreach. The BIS does not agree:

Although central banks in many advanced economies may have no choice but to keep monetary policy relatively accommodative for now, they should use every opportunity to raise the pressure for deleveraging, balance sheet repair and structural adjustment by other means.

No. They should not. Central banks—small, elite, technocratic groups given as much independence from political pressure as is institutionally possible—should absolutely not use every opportunity to raise the pressure for structural adjustment. Central bankers have been given a phenomenal amount of economic power: relatively untrammeled control over the unit of exchange and, by extension, over the demand side of the economy. Use of that phenomenal power to influence control over other aspects of the economy—including budget decisions, labour-market regulations, and the benefit structure of old-age pensions—is wildly outside the purview of the central bank and sure to prove corrosive to the independence of the central bank and the democratic process.
Central bankers will inevitably face limits on what they can achieve. These limits will occasionally be due to political choices and will often be uncomfortable or unpleasant for those central bankers. For a central bank to neglect its primary responsibilities in an effort to circumvent those limits is the height of folly and hubris. If the world is lucky, central bankers will discount the recommendations of the BIS, will instead engage in a bit of self-examination, and will go back to figuring out how best to use their tools to shepherd demand toward potential. If the world is unlucky, central bankers will embrace the BIS' excuse-making and opt instead to place unnecessary pressure on politicians that are already facing plenty of it. In that event, tough times indeed are ahead, the advent of which may usher in a regime change in thinking about central bank structure, governance, and policy.