The Mess That Greenspan Made

In Davos, former Treasury Secretary and would-be Federal Reserve Chairman Larry Summers warns the U.S. central bank to put off any increases to short term interest rates, citing deflation and secular stagnation as the two major threats of the current era of central bank omnipotence (that, lately, is evolving into something of a currency war).

Summers also doesn’t think the European Central Bank’s money printing extravaganza, announced to much fanfare yesterday (and sharply higher stock prices around the world) is going to do the eurozone much good, that is, save for another round of asset inflation.

Friday Morning Links

Oil jumps on Saudi king’s death – Reuters
King Abdullah’s Death Unlikely to Upset Saudi Oil Goals – NY Times
Draghi Dodges QE Disappointment With Plan That Might Work – Bloomberg
Europe finds little joy in Mario Draghi’s QE plan – MarketWatch
ECB’s QE is Much Too Responsible – Krugman, NY Times
Draghi’s QE blitz may save southern Europe, but lose Germany – Telegraph
SocGen on Why ECB’s QE Will Fail and Will Be Increased To €3 Trillion – Zero Hedge
Evaporating inflation and growth put pressure on central banks – Reuters
Seven Central Banks Take Anti-Deflationary Actions in Past Week – Wall St. on Parade
This Is What Gold Does In A Currency Crisis, Euro Edition – Dollar Collapse
How the Bank of Canada’s rate cut may spur faster growth – FP
Why Davos feels even more out of touch this year – Fortune
Billionaire says rest of us are living too large – MarketWatch

Asian stock markets boosted by ECB stimulus plan – AP
US Dollar Strength and US Stocks – Cumberland Advisors
Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon – Bloomberg
90% of fund managers beat the market, but shareholders don’t – MarketWatch
Bond Markets Jump Worldwide After ECB Surprises on Stimulus Size – Bloomberg
Gold slips from 5-month high as dollar, shares climb on ECB move – Reuters
Elliott Wave analyst sees much higher gold and silver prices ahead – Mineweb
Will Gold Be Part Of A New International Monetary System? – BullionStar
Gold price vs bond buys shows limits of QE –
Silver poised for bull market – Mineweb

Target ex-CEO package matches that for all 18K Canadian workers – CBC
China Joins Afghanistan’s Great Game – Bloomberg
Gov’t to Give Employees 60 Pct Pay Hike in Pension Reform – Caixin Online
Chinese manufacturing weak for second consecutive month – BBC
Putin Said to Shrink Inner Circle as Hawks Beat Billionaires – Bloomberg
Which UK city is winning the house price race? – Telegraph
Is the flipper-fueled Eastside housing market cooling down? – EastSider LA
Fed’s solo act gets tougher with ECB, others in stimulus mode – Reuters
Recent Moves by Central Banks, at a Glance – AP


While awaiting the announcement by the European Central Bank about its much anticipated money printing extravaganza, it’s worth taking a quick look at the latest musings of William White, former head of the Bank of International Settlements and a regular topic at the old blog, via this Telegraph story by Ambrose Evans Pritchard.

The economic prophet who foresaw the Lehman crisis with uncanny accuracy is even more worried about the world’s financial system going into 2015.

“We are in a world that is dangerously unanchored,” said William White, the Swiss-based chairman of the OECD’s Review Committee. “We’re seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.”

Mr White is a former chief economist to the Bank for International Settlements – the bank of central banks – and currently an advisor to German Chancellor Angela Merkel.

He warned that QE in Europe is doomed to failure at this late stage and may instead draw the region into deeper difficulties. “Sovereign bond yields haven’t been so low since the ‘Black Plague’: how much more bang can you get for your buck?”

Mr White’s warnings are ominous. He acquired great authority in his long years at the BIS arguing that global central banks were falling into a trap by holding real rates too low in the 1990s, effectively stealing growth from the future through “intertemporal” effects.

He argues that this created a treacherous dynamic…

And we know how the story went from there…

See also:

Thursday Morning Links

ECB Quantitative Easing Decision – Live – Telegraph
Draghi’s Gonna Have a Bad Day at the Office – Bloomberg
O Canada! Loonie near 6-year low after BOC surprise cut – MarketWatch
In Fort McMurray, it’s almost business as usual despite oil plunge – Globe & Mail
How Swiss Shock Humbled the King of Leveraged Currency Trading – Bloomberg
Central Bankers Lose The Plot: SNB Move Signals Spectacular Loss Of Nerve – Zero Hedge
Is Dollar Next? Investors Reassess After Swiss Shock: Currencies – Bloomberg
Illinois Schools Have Terrifying Access to Kids’ Social Media Passwords –
The New York Times won’t tell you the real story behind Ukraine – Salon
Obama’s State Of The Union Was Written For A 10th-Grader – Vocativ
Drone Carrying Three Kilos of Meth Crashes in Tijuana – Vice News
Bitcoins, Gold Bugs and Money – Bloomberg
What Is A Dollar? – Alhambra Partners

Asian stock markets meander, await ECB – AP
European shares hit seven-year high – Reuters
What’s Margin Really? – Points and Figures
These unloved stocks may beat the S&P 500 again – MarketWatch
Why Invest In Hedge Funds If They Don’t Outperform The Market? – Forbes
Treasuries Drop With Japan Bonds as Investors Weigh ECB Stimulus – Bloomberg
Gold dips further below 5-month high as shares gain ahead of ECB – Reuters
Expect Some Profit Taking In Gold If ECB Annouces Expanded QE Measures – Kitco
Gold breaches $1,300 – but beware potential headwinds – Mineweb

The Beauty of Deflation – GoldSilverWorlds
Why Falling Prices Are Actually a Really Bad Thing – Bloomberg
The Great Decoupling: Why the U.S. Is Divorcing Global Markets – Fiscal Times
Paris Has a Case Against Fox News – Bloomberg
Perhaps you missed it: We’re at war with Russia – MarketWatch
Macau ranks No. 1 in economic performance among world cities – AP
Why Mortgage Refinancing Is Booming Again – CNBC
Americans Gaining Equity Seen Lifting Housing Market: Mortgages – Bloomberg
As central banks surprise, Fed may have to throw in the towel – MarketWatch
Policy Divergence – Fed Watch

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