{"id":66896,"date":"2015-01-21T09:34:54","date_gmt":"2015-01-21T14:34:54","guid":{"rendered":"http:\/\/countingpips.com\/?p=66896"},"modified":"2015-01-21T09:34:54","modified_gmt":"2015-01-21T14:34:54","slug":"outside-the-box-the-cult-of-central-banking","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/01\/outside-the-box-the-cult-of-central-banking\/","title":{"rendered":"Outside the Box: The Cult of Central Banking"},"content":{"rendered":"
January 21, 2015<\/div>
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By John Mauldin<\/h4>\n
\"\"In today\u2019s Outside the Box,<\/em> good friend Ben Hunt informs us that we have entered the cult phase<\/em> of the Golden Age of the Central Banker:<\/p>\n

We pray for extraordinary monetary policy accommodation as a sign of our Central Bankers\u2019 love, not because we think the policy will do much of anything to solve our real-world economic problems, but because their favor gives us confidence to stay in the market. I mean, does anyone really think that the problem with the Italian economy is that interest rates aren\u2019t low enough? Gosh, if only ECB intervention could get the Italian 10-yr bond down to 1.75% from the current 1.85%, why then we\u2019d be off to the races! Really? But God forbid that Mario Draghi doesn\u2019t (finally) put his money where his mouth is and announce a trillion euro sovereign debt purchase plan. That would be a disaster, <\/em>says Mr. Market. Why? Not because the absence of a debt purchase plan would be terrible for the real economy. That\u2019s not a big deal one way or another. It would be a disaster because it would mean that the Central Bank gods are no longer responding to our prayers.<\/strong><\/p>\n

But, he points out, the cult phase of any human society is a stable<\/em> phase in the sense that, while change may happen, it will not happen from within:<\/p>\n

There is such an unwavering faith in Central Bank control over market outcomes, such a universal assumption of god-like omnipotence within this realm, that any internal market shock is going to be willed away.<\/p>\n

However, there is a minor catch: external market risk factors are all screaming red.<\/strong><\/p>\n

I\u2019ve been doing this for a long time, and I can\u2019t remember a time when there was such a gulf between the environmental or exogenous risks to the market and the internal or behavioral dynamics of the market. The market today is Wile E. Coyote wearing his latest purchase from the Acme Company \u2013 a miraculous bat-wing costume that prevents the usual plunge into the canyon below by sheer dint of will.<\/p>\n

\"\"<\/p>

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Ben identifies the three most pressing exogenous risks as the \u201csupply shock\u201d of collapsing oil prices, a realigning Greek election, and the realpolitik dynamics of the West vs. Islam and the West vs. Russia. (You or I might want to expand Ben\u2019s list with one or two of our own favorites; but the point is, it\u2019s a big, bad, volatile world out there right now.) Ben admits that it feels a bit weird to have written on all three of his chosen topics a few weeks before each of them appeared on investors\u2019 radar screens. \u201cCall me Cassandra,\u201d says Ben. (Naw, I\u2019ll stay with Ben.)<\/p>\n

I wouldn\u2019t want to steal too much of Ben\u2019s thunder here, but I just can\u2019t help sharing with you the punch line to his piece: \u201cThe gods always end up disappointing us mere mortals.\u201d\u00a0 <\/strong>This is one of Ben\u2019s better pieces, and I really commend it to you as something you need to think about.<\/p>\n

Before we examine our collective religious delusions (or at least our central banking delusions), let\u2019s have a little fun. My friend Dennis Gartman (who could be the hardest-working writer in the business) found this gem and shared it with his readers this morning. It is about the supposed lack of environmental concern of the Boomer generation has. And some of you will read it that way.<\/p>\n

But I want those of you who are of a certain age (ahem) to realize just how much your world has changed in the last 50 years. If you are young, yes, we really did all the stuff listed below. I personally experienced every one of the rather long list of activities mentioned by the \u201clittle old lady.\u201d Major changes in lifestyle since then? No, not really. But I\u2019ll grand you that things are a good deal more convenient and time-saving today. Now sit back and enjoy.<\/p>\n

Checking out at the store, the young cashier suggested to the much older lady that she should bring her own grocery bags, because plastic bags are not good for the environment. The woman apologized to the young girl and explained, “We didn’t have this ‘green thing’ back in my earlier days.” The young clerk responded, “That’s our problem today. Your generation did not care enough to save our environment for future generations.” The older lady said that she was right \u2013 her generation didn’t have the “green thing” in its day. The older lady went on to explain: \u201cBack then, we returned milk bottles, soda bottles and beer bottles to the store. The store sent them back to the plant to be washed and sterilized and refilled, so it could use the same bottles over and over. So they really were recycled. But we didn’t have the \u2018green thing\u2019 back in our day. Grocery stores bagged our groceries in brown paper bags that we reused for numerous things. Most memorable besides household garbage bags was the use of brown paper bags as book covers for our school books. This was to ensure that public property (the books provided for our use by the school) was not defaced by our scribblings. Then we were able to personalize our books on the brown paper bags. But, too bad we didn’t do the \u2018green thing\u2019 back then. We walked up stairs because we didn’t have an escalator in every store and office building. We walked to the grocery store and didn’t climb into a 300-horsepower machine every time we had to go two blocks. But you\u2019re right, we didn’t have the \u2018green thing\u2019 in our day. Back then we washed the baby’s diapers because we didn’t have the throwaway kind. We dried clothes on a line, not in an energy-gobbling machine burning up 220volts. Wind and solar power really did dry our clothes back in the early days. Kids got hand-me-down clothes from their brothers or sisters (and cousins), not always brand-new clothing. But you\u2019re right, young lady; we didn’t have the \u2018green thing\u2019 back in our day. Back then we had one TV, or radio, in the house \u2013 not a TV in every room. And the TV had a screen the size of a handkerchief [remember them?], not a screen the size of the state of Montana. In the kitchen we blended and stirred by hand because we didn’t have electric machines to do everything for us. When we packaged a fragile item to send in the mail, we used wadded up old newspapers to cushion it, not Styrofoam or plastic bubble wrap. Back then, we didn’t fire up an engine and burn gasoline just to cut the lawn. We used a push mower that ran on human power. We exercised by working, so we didn’t need to go to a health club to run on treadmills that operate on electricity.\u201d But you\u2019re right; we didn’t have the \u2018green thing\u2019 back then. We drank from a fountain when we were thirsty instead of using a cup or a plastic bottle every time we had a drink of water. We refilled writing pens with ink instead of buying a new pen, and we replaced the razor blade in a razor instead of throwing away the whole razor just because the blade got dull. But we didn’t have the \u2018green thing back then. Back then, people took the streetcar or the bus, and kids rode their bikes to school or walked instead of turning their moms into a 24-hour taxi service in the family’s $45,000 SUV or van, which cost what a whole house did before the \u2018green thing.\u2019 We had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And we didn’t need a computerized gadget to receive a signal beamed from satellites 23,000 miles out in space in order to find the nearest burger joint. But, isn’t it sad, how the current generation laments how wasteful we old folks were just because we didn’t have the \u2018green thing\u2019 back then?\u201d<\/p>\n

I wonder what our grandchildren will be telling their grandchildren in 50 years\u2026 \u201cI remember a time when we actually used combustion engines to drive our cars that belched out dirty gases. We actually had massive electricity-generating power plants and wires everywhere to deliver the electricity, rather than the small, efficient home units that produce free electricity for us now. We used something called glasses to help us see. People actually had to carry their communications devices around, and computers were measured in pounds not ounces. We had to do something called \u201ctyping\u201d to write; and while we didn\u2019t have to actually go to places called libraries like our grandparents did, we could and did spend all day searching through a disorganized Internet for what we needed. You weren\u2019t connected biologically to your computer, so getting information in and out of it was a drag.<\/p>\n

\u201cPeople actually got sick and died; and though the situation was getting better, billions of people didn\u2019t have enough food at night. People went to big stores to buy what was needed rather than just ordering it or producing it on the spot. We actually threw garbage away in huge resource-consuming \u201cdumps\u201d rather than completely recycling it into new products at the back of the house. It took like forever to get from one point to another. People actually had to \u201cdrive\u201d their car rather than just getting in it and telling it where to go. And people died all the time in those cars \u2013 they were so dangerous and uncomfortable. In those days you couldn\u2019t even instantly communicate with anybody by just thinking. You had to push buttons on that clumsy communication device you hauled around, and then talk into it; and if you lost it you were out of touch and out of luck. We didn\u2019t even have intelligent personal robots in those days. It was so Stone Age.\u201d<\/p>\n

I could go on and on, but you get the drift. The changes in the last 50 years are simply a down payment on the change we\u2019ll see and live in the next 50.<\/p>\n

When I think about central banks and markets and try to figure out how to get preserve and grow assets from where we are today to where we will be in 10 years, it can be a rather daunting and sometimes even a depressing task. But then I think about what the world will be like and how much fun my grandkids are going to have, and I get all optimistic and smiling again.<\/p>\n

Have a great week. The future is going to turn out just fine.<\/p>\n

Your wondering if we will have flying cars analyst,<\/p>\n

John Mauldin, Editor
\nOutside the Box<\/em>subscribers@mauldineconomics.com<\/a><\/p>\n

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\u201cCatch-22\u201d<\/strong><\/span><\/h2>\n

By Ben Hunt, Salient Partners<\/strong>
\nEpsilon Theory, Jan. 12, 2015<\/p>\n

\"\"<\/p>\n

Four times during the first six days they were assembled and briefed and then sent back. Once, they took off and were flying in formation when the control tower summoned them down. The more it rained, the worse they suffered. The worse they suffered, the more they prayed that it would continue raining. All through the night, men looked at the sky and were saddened by the stars. All through the day, they looked at the bomb line on the big, wobbling easel map of Italy that blew over in the wind and was dragged in under the awning of the intelligence tent every time the rain began. The bomb line was a scarlet band of narrow satin ribbon that delineated the forward most position of the Allied ground forces in every sector of the Italian mainland.<\/p>\n

For hours they stared relentlessly at the scarlet ribbon on the map and hated it because it would not move up high enough to encompass the city.<\/p>\n

When night fell, they congregated in the darkness with flashlights, continuing their macabre vigil at the bomb line in brooding entreaty as though hoping to move the ribbon up by the collective weight of their sullen prayers. “I really can’t believe it,” Clevinger exclaimed to Yossarian in a voice rising and falling in protest and wonder. “It’s a complete reversion to primitive superstition. They’re confusing cause and effect. It makes as much sense as knocking on wood or crossing your fingers. They really believe that we wouldn’t have to fly that mission tomorrow if someone would only tiptoe up to the map in the middle of the night and move the bomb line over Bologna. Can you imagine? You and I must be the only rational ones left.”<\/p>\n

In the middle of the night Yossarian knocked on wood, crossed his fingers, and tiptoed out of his tent to move the bomb line up over Bologna.<\/strong><\/p>\n

\u2015 Joseph Heller, \u201cCatch-22\u201d (1961)<\/em><\/p>\n

A visitor to Niels Bohr’s country cottage, noticing a horseshoe hanging on the wall, teased the eminent scientist about this ancient superstition. \u201cCan it be true that you, of all people, believe it will bring you luck?\u201d<\/strong><\/p>\n

\u201cOf course not,\u201d replied Bohr, \u201cbut I understand it brings you luck whether you believe it or not.\u201d<\/strong><\/p>\n

\u2015 Niels Bohr (1885 \u2013 1962)<\/em><\/p>\n

Here’s an easy way to figure out if you’re in a cult: If you’re wondering whether you’re in a cult, the answer is yes.<\/strong><\/p>\n

\u2015 Stephen Colbert, \u201cI Am America (And So Can You!)\u201d (2007)<\/em><\/p>\n

I won’t insult your intelligence by suggesting that you really believe what you just said.<\/strong><\/p>\n

\u2015 William F. Buckley Jr. (1925 \u2013 2008)<\/em><\/p>\n

A new type of superstition has got hold of people’s minds, the worship of the state.<\/strong><\/p>\n

\u2015 Ludwig von Mises (1881 \u2013 1973)<\/em><\/p>\n

The cult is not merely a system of signs by which the faith is outwardly expressed; it is the sum total of means by which that faith is created and recreated periodically. Whether the cult consists of physical operations or mental ones, it is always the cult that is efficacious.<\/strong><\/p>\n

\u2015 Emile Durkheim, <\/em>\u201cThe Elementary Forms of Religious Life\u201d (1912)<\/em><\/p>\n

At its best our age is an age of searchers and discoverers, and at its worst, an age that has domesticated despair and learned to live with it happily.<\/strong><\/p>\n

\u2015 Flannery O\u2019Connor (1925 \u2013 1964)<\/em><\/p>\n

Man is certainly stark mad; he cannot make a worm, and yet he will be making gods by dozens.<\/strong><\/p>\n

\u2015 Michel de Montaigne (1533 \u2013 1592)<\/em><\/p>\n

Since man cannot live without miracles, he will provide himself with miracles of his own making. He will believe in witchcraft and sorcery, even though he may otherwise be a heretic, an atheist, and a rebel.<\/strong><\/p>\n

\u2015 Fyodor Dostoyevsky, <\/em>\u201cThe Brothers Karamazov\u201d (1880)<\/em><\/p>\n

One Ring to rule them all; one Ring to find them.\u2028One Ring to bring them all and in the darkness bind them.<\/strong><\/p>\n

\u2015 J.R.R. Tolkien, <\/em>\u201cThe Lord of the Rings\u201d (1954)<\/em><\/p>\n

Nothing\u2019s changed.\u2028I still love you, oh, I still love you. Only slightly, only slightly less Than I used to.<\/strong><\/p>\n

\u2015 The Smiths, <\/em>\u201cStop Me If You\u2019ve Heard This One Before\u201d (1987)<\/em><\/p>\n

So much of education, I think, relies on reading the right book at the right time. My first attempt at Catch-22 <\/em>was in high school, and I was way too young to get much out of it. But fortunately I picked it up again in my late 20\u2019s, after a few experiences with The World As It is, and it\u2019s stuck with me ever since. The power of the novel is first in the recognition of how often we are stymied by Catch-22\u2019s \u2013 problems that can\u2019t be solved because the answer violates a condition of the problem. The Army will grant your release request if you\u2019re insane, but to ask for your release proves that you\u2019re not insane. <\/strong>If X and Y, then Z. But X implies not-Y. That\u2019s a Catch-22.<\/p>\n

Here\u2019s the Fed\u2019s Catch-22. If the Fed can use extraordinary monetary policy measures to force market risk-taking (the avowed intention of both Zero Interest Rate Policy and Large Scale Asset Purchases) AND the real economy engages in productive risk-taking (small business loan demand, wage increases, business investment for growth, etc.), THEN we have a self-sustaining and robust economic recovery underway. But the Fed\u2019s extraordinary efforts to force market risk-taking and inflate financial assets discourage <\/em>productive risk-taking in the real economy, both because the Fed\u2019s easy money is used by corporations for non-productive uses (stock buy-backs, anyone?) and because no one is willing to invest ahead of global growth when no one believes that the leading indicator of that growth \u2013 the stock market \u2013 means <\/em>what it used to mean.<\/strong><\/p>\n

If X and Y, then Z. But X denies Y. Catch-22.<\/p>\n

There\u2019s a Catch-22 for pretty much everyone in the Golden Age of the Central Banker. Are you a Keynesian? Your Y to go along with the Central Bank X is expansionary fiscal policy and deficit spending. Good luck getting that through your polarized Congress or Parliament or whatever if your Central Bank is carrying the anti-deflation water and providing enough accommodation to keep your economy from tanking. Are you a structural reformer? Your Y to go along with the Central Bank X is elimination of bureaucratic red tape and a shrinking of the public sector. Again, good luck with that as extraordinary monetary policy prevents the economic trauma that might give you a chance of passing those reforms through your legislative process.<\/p>\n

Here\u2019s the thing. A Catch-22 world is a frustrating, absurd world, a world where we domesticate despair and learn to live with it happily. It\u2019s also a very stable world. <\/strong>And that\u2019s the real message of Heller\u2019s book, as Yossarian gradually recognizes what Catch-22 really IS. There is no Catch-22. It doesn\u2019t exist, at least not in the sense of the bureaucratic regulation that it purports to be. But because everyone believes that it exists, then an entire world of self-regulated pseudo-religious behavior exists around Catch-22. <\/strong>Sound familiar?<\/p>\n

We\u2019ve entered a new phase in the Golden Age of the Central Banker \u2013 the cult phase, to use the anthropological lingo. <\/strong>We pray for extraordinary monetary policy accommodation as a sign of our Central Bankers\u2019 love, not because we think the policy will do much of anything to solve our real-world economic problems, but because their favor gives us confidence to stay in the market. I mean … does anyone really think that the problem with the Italian economy is that interest rates aren\u2019t low enough? Gosh, if only ECB intervention could get the Italian 10-yr bond down to 1.75% from the current 1.85%, why then we\u2019d be off to the races! Really? But God forbid that Mario Draghi doesn\u2019t (finally) put his money where his mouth is and announce a trillion euro sovereign debt purchase plan. That would be a disaster, <\/em>says Mr. Market. Why? Not because the absence of a debt purchase plan would be terrible for the real economy. That\u2019s not a big deal one way or another. It would be a disaster because it would mean that the Central Bank gods are no longer responding to our prayers. <\/strong>The faith-based system that underpins current financial asset price levels would take a body blow. And that would indeed be a disaster.<\/p>\n

Monetary policy has become a pure signifier \u2013 a totem. <\/strong>It\u2019s useful only in so far as it indicates that the entire edifice of Central Bank faith, both its mental and physical constructs, remains \u201cefficacious\u201d, to use Emile Durkheim\u2019s path-breaking sociological analysis of a cult. All of us are Yossarian today, far too rational to think that the totem of a red line on a map actually makes a difference in whether we have to fly a dangerous mission. And yet here we are sneaking out at night to move that line on the map. All of us are Niels Bohr today, way too smart to believe that the totem of a horseshoe actually bring us good luck. And yet here we are keeping that horseshoe up on our wall, because … well … you know.<\/p>\n

The notion of saying our little market prayers and bowing to our little market talismans is nothing new. \u201cHey, is that a reverse pennant pattern I see in this stock chart?\u201d \u201cYou know, the third year of a Presidential Administration is really good for stocks.\u201d \u201cI thought the CFO\u2019s\u2028body language at the investor conference was very encouraging.\u201d \u201cWell, with the stock trading at less than 10 times cash flow I\u2019m getting paid to wait.\u201d Please. I recognize aspects of myself in all four of these cult statements, and if you\u2019re being honest with yourself I bet you do, too.<\/p>\n

\"\"<\/p>\n

No, what\u2019s new today is that all of our little faiths have now converged on the Narrative of Central Bank Omnipotence. It\u2019s the One Ring that binds us all.<\/strong><\/p>\n

I loved this headline article in last Wednesday\u2019s Wall Street Journal <\/em>\u2013 \u201cEurozone Consumer Prices Fall for First Time in Five Years\u201d \u2013 a typically breathless piece trumpeting the \u201cspecter of deflation\u201d racing across Europe as … oh-my-god … December consumer prices were 0.2% lower than they were last December. Buried at the end of paragraph six, though, was this jewel: \u201cExcluding food, energy, and other volatile items, core inflation rose to 0.8%, up a notch from November.\u201d Say what? You mean that if you measure inflation as the US measures inflation, then European consumer prices aren\u2019t going down at all, but are increasing <\/em>at an accelerating <\/em>pace? You mean that the dreadful \u201cspecter of deflation\u201d that is \u201ccementing\u201d expectations of massive ECB action is entirely <\/em>caused by the decline in oil prices, something that from the consumer\u2019s perspective acts like an inflationary <\/em>tax cut? Ummm … yep. That\u2019s exactly what I mean. The entire article is an exercise in Narrative creation, facts be damned. The entire article is a wail from a minaret, a paean to the ECB gods, a calling of the faithful to prayer. <\/strong>An entirely successful calling, I might add, as both European and US markets turned after the article appeared, followed by Thursday\u2019s huge move up in both markets.<\/p>\n

When I say that a Catch-22 world is a stable world, or that the cult phase of a human society is a stable phase, here\u2019s what I mean: change can happen, but it will not happen from within. <\/strong>For everyone out there waiting for some Minsky Moment, where a debt bubble of some sort ultimately pops from some unexpected internal cause like a massive corporate default, leading to systemic fear and pain in capital markets … I think you\u2019re going to be waiting for a loooong time. Are there debt bubbles to be popped? Absolutely. The energy sector, particularly its high yield debt, is Exhibit #1, and I think this could be a monster trade. But is this something that can take down the market? I don\u2019t see it. There is such an unwavering faith in Central Bank control over market outcomes, such a universal assumption of god-like omnipotence within this realm, that any internal market shock is going to be willed away.<\/p>\n

So is that it? Is this a brave new world of BTFD market stability? Should we double down on our whack- a-mole volatility strategies? For internal market risks like leverage and debt bubble scares … yes, I think so. But while the internal market risk factors that I monitor are quite benign, mostly green lights with a little yellow\/caution peeking through, the external market risk factors that I monitor are all screaming red. <\/strong>These are Epsilon Theory risk factors \u2013 political shocks, trade\/forex shocks, supply shocks, etc. \u2013 and they\u2019ve got my risk antennae quivering like crazy. I\u2019ve been doing this for a long time, and I can\u2019t remember a time when there was such a gulf between the environmental or exogenous risks to the market and the internal or behavioral dynamics of the market. The market today is Wile E. Coyote wearing his latest purchase from the Acme Company \u2013 a miraculous bat-wing costume that prevents the usual plunge into the canyon below by sheer dint of will. There\u2019s absolutely nothing internal to Coyote or his bat suit that prevents him from flying around happily forever. It\u2019s only that rock wall that\u2019s about to come into the frame that will change Coyote\u2019s world.<\/p>\n

\"\"<\/p>\n

My last three big Epsilon Theory notes \u2013 \u201cThe Unbearable Over-Determination of Oil\u201d, \u201cNow There\u2019s Something You Don\u2019t See Every Day, Chauncey\u201d, and \u201cThe Clash of Civilizations\u201d \u2013 have delved into what I think are the most pressing of these environmental or exogenous risks to the market: the \u201csupply shock\u201d of collapsing oil prices, a realigning Greek election, and the realpolitik dynamics of the West vs. Islam and the West vs. Russia. I gotta say, it\u2019s been weird to write about these topics a few weeks before ALL of them come to pass. Call me Cassandra. I stand by everything I wrote in those notes, so no need to repeat all that here, but a short update paragraph on each.<\/p>\n

First, Greece. And I\u2019ll keep it very short. Greece is on. <\/strong>This will not be pretty and this will not be easy. Existential Euro doubt will raise its ugly head once again, particularly when Italy imports the Greek political experience.<\/p>\n

Second, oil. I get a lot of questions about why oil can\u2019t catch a break, about why it\u2019s stuck down here with a 40 handle as the absurd media Narrative of \u201cglobal supply glut forever and ever, amen\u201d whacks it on the head day after day after day. And it is an absurd Narrative … very Heller-esque, in fact … about as realistic as \u201cPeak Oil\u201d has been over the past decade or two. Here\u2019s the answer: oil is trapped in a positive Narrative feedback loop. <\/strong>Not positive in the sense of it being \u201cgood\u201d, whatever that means, but positive in the sense of the dominant oil Narrative amplifying the uber-dominant Central Bank Narrative, and vice versa. The most common prayer to the Central Banking gods is to save us from deflation, and if oil prices were not falling there would be no deflation anywhere in the world, <\/em>making the prayer moot. <\/strong>God forbid that oil prices go up and, among other things, push European consumer prices higher. Can\u2019t have that! Otherwise we\u2019d need to find another prayer for the ECB to answer. By finding a role in service to the One Ring of Central Bank Omnipotence, the dominant supply-glut oil Narrative has a new lease on life, and until the One Ring is destroyed I don\u2019t see what makes the oil Narrative shift.<\/p>\n

Third, the Islamist attack in Paris. Look … I\u2019ve got a LOT to say about \u201cje suis Charlie\u201d, both the stupefying hypocrisy <\/em>of how that slogan is being used by a lot of people who should really know better, as well as the central truth <\/em>of what that slogan says about the Us vs. Them nature of The World As It Is, <\/strong>but both are topics for another day. What I\u2019ll mention here are the direct political repercussions in France. The National Front, which promotes a policy platform that would make Benito Mussolini beam with pride, would probably have gotten the most votes of any political party in France before <\/em>the attack. Today I think they\u2019re a shoo-in to have first crack at forming a government whenever new Parliamentary elections are held, and if you don\u2019t recognize that this is 100 times more threatening to the entire European project than the prospects of Syriza forming a government in Greece … well, I just don\u2019t know what to say.<\/p>\n

There\u2019s another thing to keep in mind here in 2015, another reason why selling volatility whenever it spikes up and buying the dip are now, to my way of thinking, picking up pennies in front of a steam roller: the gods always end up disappointing us mere mortals. <\/strong>The cult phase is a stable system on its own terms (a social equilibrium, in the parlance), but it\u2019s rarely what an outsider would consider to be a particularly happy or vibrant system. There\u2019s no way that Draghi can possibly announce a bond- buying program that lives up to the hype, not with peripheral sovereign debt trading inside US debt. There\u2019s no way that the Fed can reverse course and start loosening again, not if forward guidance is to have any meaning (and even the gods have rules they must obey). Yes, I expect our prayers will still be answered, but each time I expect we will ask in louder and louder voices, \u201cIs that all there is?\u201d Yes, we will still love our gods, even as they disappoint us, but we will love them a little less each time they do.<\/p>\n

And that\u2019s when the rock wall enters the cartoon frame.<\/p>\n

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Important Disclosures<\/em><\/strong><\/a><\/p>\n

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The article Outside the Box: The Cult of Central Banking<\/a> was originally published at mauldineconomics.com<\/a>.<\/div>\n
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By John Mauldin In today\u2019s Outside the Box, good friend Ben Hunt informs us that we have entered the cult phase of the Golden Age of the Central Banker: We pray for extraordinary monetary policy accommodation as a sign of our Central Bankers\u2019 love, not because we think the policy will do much of anything […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-66896","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/66896","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=66896"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/66896\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=66896"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=66896"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=66896"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}