Blain’s Morning Porridge – 8 Oct 2019 – Central Bank Fake News

Blain’s Morning Porridge  – October 8th 2019

“I’m Mad as Hell, And I’m Not Going To Take This Anymore.” 



First thing I did this morning was to get out on my balcony overlooking the Thames and have a good look to see if there was any sign of the Whale.  Nope.  JP Morgan sacked him years ago…

And then I read the papers… and they put me in a foul mood. I am more than a bit peeved this morning.  In fact, normally placid Bill Blain is really quite miffed.  Even Angry!  I really can’t believe the utter crap I’ve just read in the FT…


What’s upsetting me?  The FT carries a story: “What a decade of monetary policy innovation has taught us”.  It is a precis of two reports written by Central Bankers via the Bank of International Settlements justifying their actions since 2008.  If you’ve ever looked for proof that history is written by the winners and is absolutely bogus, then the reports by two committee of the BIS on “unconventional monetary policy” and the effects of “large central bank balance sheets on market function” are great examples.

I could go thru the reports line by line and refute everything they say, but what would be the point? The press have digested the self-serving Press Releases, and simply and uncritically regurgitated what they’ve been asked to write.  What journalist would dare upset a central banker? (Well, there are some – like Marcus Ashworth on BBerg taking a pop at Mario Draghi’s Toxic ECB Legacyy’day.)

The two reports are littered with bogus CB successes. They say the actions of the central banks in terms of “unconventional monetary policy”, expanding their balance sheets through QE and

driving down interest rates avoided a deflationary spiral and improved market functioning.  Apparently reducing the availability of bonds on the markets had “some side-effects on market function”, which were addressed by central bank countermeasures.

What???? *&^%£&< !!!!!

Any market professional with an ounce of respect and knowledge knows the last 10-years of financial repression, regulatory revenge sideswipes, and central bank incompetence has utterly distorted market function and created a host of dangerous unintended consequences that we see daily in terms of insane market trends.

The BIS reports are post-factual fake news manipulations of reality.  They will no doubt achieve their aim of rewriting the financial histories to enhance the reputations of the guilty.  But, the reports are Utter Codswallop – seriously I swore out loud as I read the story.  If the BIS reports are the best Central Bankers can do, then we are absolutely rubber ducked.

The blunt and brutal reality is that Central Bank Unconventional Monetary Policies have triggered the most heinous market distortions in economic history. They have caused massive inflation in financial assets that only served to widen income inequalities and did nothing to benefit the real economy.  The reports make absolutely no attempt to put “Extraordinary Monetary Policy” in the context of the Real World economy and politics.

The bottom line is that QE, NIRP (negative interest rate policy) and the rest of the central bank flat-earth policies came alongside a whole raft of equally devasting policy mistakes including government austerity and the over-reactive over-regulation of financial markets. The result of bailing out banks with public money, making the rich richer while making the poor poorer made populist politics inevitable.

And don’t think for one second that Central Banks have fixed anything.  Artificially low interest rates will not work indefinitely – they only delay an inevitable decay into deflationary traps or a massive financial reset. Making markets less efficient by distorting them ensures a future liquidity crisis.

If you want to learn more about how Central Bank remain culpable for the current miserable distortions of global market – then may I humbly suggest my recent book: The Fifth Horseman – How to Destroy the Global Economy.

I wrote it during the dog days of summer to connect how Monetary Experimentation, QE, over-hasty Financial Regulation, Austerity Government Spending policies, and broken Politics have combined to utterly distort markets, and trigger todays chronic financial instabilities and uncertainties.  However, I very quickly realised such a book would be very boring. So I retold the story as:

A series of hacked emails reveals how Hell’s Top Banker and His Boss continue the plan they began with the Global Financial Crisis in 2007/08 to destroy the Global Economy. 

The demonic pair discuss how Monetary Experimentation and QE, over-hasty Financial Regulation, Austerity Government Spending policies, and broken Politics assisted their infernal plot. The next stage will be to further weaken the global economy through protectionism and populism, while crushing confidence in global fiat money through Modern Monetary Theory, distractions like crypto-currencies, and mankind’s general financial stupidity.

It explains why stock and bond markets are at record levels, yet the global economy feels more unstable and uncertain. It becomes clear why the rich get richer and the poor get poorer while government’s have taken their eye off solutions, including the rising environmental crisis. As a plan, its brilliant… and its working! The Devil and His Bankers even know how to solve it – but that would be telling.

Blain’s short novel is a tongue-in-cheek Polemic – laying the blame for the ongoing market and economic crisis on bankers, regulators, central bankers and politicians, but mostly ourselves.

Check it out on Amazon Kindle – 100% 5star reviews!

Debt, Debt and more Debt…. 

If you want just one example of just how wrong things are going…

After calming my fury at the story – helped by She-who-is-now-Mrs-Blain making me a coffee,  I turned on BBC Brek-drek. The tall chap who sometimes gets to do the token business story did a rather good report on the problems of Pizza Express:  The point was simple – Pizza Express has been making the essentially the same excellent pizzas since 1965. It remains popular and makes decent money, but is crippled servicing its’ £1.1 bln debt burden.  It’s called in the “advisors”.

Yet, global interest rates have never been so low.  (I tried to decipher a graph last week suggesting the average interest rate over the last 5000 years has been between 4-5%, and today’s rates are the lowest in history – which should be ringing alarm bells about deflation – or Japanification as its now trendily called.  Whatever, it’s definitely not the fault of Central Bankers. It never is.)

If a company with a 50-year track-record is going bust because of debt – then what chance for the rest of the Zombie over-levered economy?  What real opportunities are there for companies to access low debt to refinance?  None!  Rates may be ultra low, but how does that assist the real economy? Central banks and governments bailed out the banks years ago – but they show precisely zero willingness to assist the real economy.  (Hang on – its never the fault of Central Bankers.. is it?)

At the micro level, Mrs Blain recently discovered her bank had unilaterally cancelled her business account overdraft – no discussion, no thoughts for the business implications and they demanded she settle the outstanding amount immediately. Try asking HRMC for a tax payment extension because the bank demanded immediate repayment of an agreed overdraft, and see where that gets you. (Clue – mail bag sewing lessons.)

Over the past few months I’ve noticed an increasing trend for Junk Issuers to issue desperate high coupon bonds to get them past debt crisis.  Last week it was a bank forced to borrow sub at 9%, or whatever We-Work will be forced to pay for the loan it now won’t get after its IPO stalled? Or struggling companies looking to launch last-ditch mini-bonds on unsuspecting retail issuers.   The debt crisis has started, chipping away at the edges of the credit market… (But its definitely not the fault of Central Bankers .. is it?)

There is a growing risk these smouldering embers will blevy into a full scale debt crisis with rising refinancing risk and liquidity risk. It’s a when, not if, question. The market swings will see heavily levered and troubled credits struggle to refinance. Its going to trigger a liquidity crisis.. and we all know how well that won’t end. (But it won’t be the fault of Central Bank.. will it?)

(Crashing minor/major chords..… mwah hah hah…)

Out of time and back to the day job

Bill Blain

Shard Capital