Quote from ASusilovic:
You forget about the fact that we have four major central banks around the world fighting deflation. USA, ECB, BOE, BOJ.
Fighting alone on the deflation front is not as "funny" as with some partners on board.
At some point China needs to decide what it wants - further playing the "fool" card or finally lettin the yuan appreciate in a truly "free" manner.
Nothing of the sort has been forgotten.
It's not really a question of how many central banks are "fighting." It's a question of whether QE really works at all at the tail end of a leverage and debt supercycle. So far the evidence points to "no."
As far as those four central banks go, the BOJ doesn't really count (as they have been fighting and failing for decades) and the first three are increasingly hamstrung by austerity issues.
Namely, when you are already loaded up on debt, you can only create so much more debt before there is a strong political backlash. This is exactly what Britain, Europe and the USA are now experiencing.
-- Ireland (one of the first countries to commit to heavy austerity measures) was just downgraded by Standard & Poors as their economic outlook continues to look bleak.
-- David Cameron of Britain was recently on the cover of The Economist, headline "Radical Britain," highlighting how the UK is pushing through some of the harshest austerity measures of all.
-- There has been a deluge of stuff on austerity measures in Europe and the danger that determination to belt-tighten will wind up killing off any recovery there (the gap between Germany and the rest of the EU growing terminally wide).
-- In the United States, the Dems have lost their political momentum, Republicans are set for significant gains, and the Repubs are dead set against future stimulus spending, arguing that it is wasteful and dangerous.
-- The now-failing stimulus shot in the U.S.A., which only juiced things for a little while, argues strongly that stimulus is lousy medicine anyway once an economy has gone beyond a certain point of no return, re, accumulated debt and public and private deleveraging pressures.
Bottom Line: Not only do we have ample reason to doubt stimulus works, we have reason to doubt the political will is there for another massive spending push in the first place, the alternative being anemic efforts that just barely keep growth above the zero line. (The Fed, a la the BOJ, can jawbone all it wants as talk is cheap.)
The classic catch-22 of a leverage and debt supercycle, as clarified way back when by Von Mises, is that in the end there is just no way around the debt blockage. You wind up either letting the economy pass through a long and painful period of adjustment, or alternatively you "push on a string" so hard that you wind up destroying the currency.
It remains to be seen, of course, whether the four central banks all ultimately decide to push on the string with a great heave, all at the same time. If this happens, economic revival is still not a likely outcome in comparison to the hard-assets price spiral scenario as all major fiat currencies get uniformly debased, combined with further compression in PE multiples as the global economy faces even greater amounts of confusion and malaise.
As for China, it's a wee bit more complicated than the mandarins in Beijing just "deciding" something. The dragon is being squeezed into a very tight box due to the accumulated fallout of irreversible past choices -- it was rather foolish of them to aggressively emulate the "extend and pretend" bubble-creating policies of Alan Greenspan for one -- and the odds of crisis in China (both economic and social) rise by the day.
