Central Bank PHDs Will Fail Again

Jim Grant likes to say the U.S. has gone from the gold standard to the PHd standard with an army of doctorate holding economists steering monetary policy. Of course, the same goes for the European Union directed by Mario Draghi, China and Japan.  The confidence economists have in central bank financial engineering is stunning.

Almost Daily Grant’s illustrated citing this quote:

“The Fed could have reversed at any time, they could stop and correct,” said Gilles Moëc, chief European economist at Bank of America Merrill Lynch and a former Bank of France economist. “The ECB has no possibility to get it wrong.”

Oh really?

Michael Oliver, who analyzes market momentum recently did a Real Vision TV interview where he explained his case for shifting momentum in the four main asset classes; stocks, bonds, currencies and commodities. Stocks, bonds and the dollar will sell off, he said, commodity prices will rise, as will the euro.

Near the end, he’s asked “Can central banks contain these momentum breaks?”

He doesn’t think so. “It is an untruth that you can’t fight the Fed.” Exhibit A, 2008. “They fought it all the way down and the market collapsed anyway.” Oliver said the central banks have created such an excess, that when the unwinding occurs and the central banks flood the system with money, it will go into commodities, not securities, “which is exactly where they don’t want it to go.”

He believes mother nature will take over and the PHds will only be able to stand by and watch.  Then he says something you don’t hear very often,

It wouldn’t surprise me that in three to five years, some of the central banks that exist in the western world don’t exist anymore.That thinkers in politics, and so forth, will conclude that this was a bad idea. Let’s back our currency with something real. Let’s don’t do this manipulated money unit stuff anymore.

Picture ex-Fed economists standing in a soup line.