Central Banks Have Signed Their Death Warrants
During the past year U.S. consumption spending for health care rose by 5%. Spending at restaurants and bars were up by 9%, while spending for gasoline and other energy products was down by 22%.
This was Mr. Market at work--millions of households reallocating their spending in response to relative price changes. It had nothing to do with a macroeconomic abstraction called "weak demand".
Actually, the medical care component of the CPI rose 3.3% last year. Housing and shelter were up by 3.2%, while gasoline prices were down by 7.3%. It all added up to a 1.34% annual change in the overall CPI index by the sheer coincidence of BLS's arbitrary weightings of the index components.
Again, it had nothing to do with the pace of total consumption expenditures or any other measurement of "aggregate demand."
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Ultimately, the central bankers will go for the real thing--NIRP for real people who are trying to save a nest egg. To be sure, a pipe-smoking economist will say there's no appreciable difference between positive 30 basis points and negative 30 basis points on a CD.
But there is. And the great political inflection point will come when policy elites try to pull that stunt on real people. NIRP will be the flashing neon lights announcing that the government is confiscating the people's savings and wealth.
When they actually try to impose NIRP on their own people and not just the commercial banks, the central banks will be signing their political death warrants. That day can come none too soon.
(Excerpt) Read more at dailyreckoning.com ...
