Speaking at the World Economic Forum, “our girl” (Tim Geithner’s term) Christine Lagarde announced to a largely unsurprised audience that stimulus measures weren’t actually doing much of … well, anything. Using carefully crafted lingo intended to preserve the believability of now failed monetary policies, Lagarde spun it like this:
The measures to sustain demand, despite the best intentions of central banks, are finding their limit.
Which must be French for, “This isn’t working”.
Despite the European Central Bank’s best efforts to use negative interest rates to chase non-productive assets (and to drive money out of the EU altogether), the policies have –shock– failed to achieve greater consumer demand. How this was ever supposed to work in the first place was never logically explained by anyone at the ECB, but it is clear that both Lagarde at the IMF and the monetary mandarins in Brussels believe in closed-systems and other fallacies. For example, they clearly believe that money chased out of bank accounts will immediately conjure forth the economic equivalent of perpetual motion, and not be driven off-shore in a vast deflationary wealth-transfer. That rate-slashing doesn’t work is unsurprising to virtually anyone who understands fundamental economics, but it’s nice to see the permanently-tanned Lagarde slowly begin to wrap her brain around the concept of “Fail”.
And although such admissions of failure might be misconstrued as heralding some forthcoming change in policy, no such logic took the stage today:
Legarde’s admission that growth will be “less robust than expected” turned out to be nothing more than a preamble to her recommendation that where failures have occurred in the past, efforts should be redoubled in the future so that policy-makers might fail even more spectacularly sometime in the near future.
It is there for evident, from our point of view, to reinforce supply capacity in order to strengthen the recovery,
Just two questions: If it’s not working by your own admission, why are you still calling it a recovery? And how long until you start Cyprus-ing the money directly out of private accounts to use as stimulus?