What is next? Thoughts on the Central Bank Chess Game

Central Banks want inflation while pumping up the stock and bond market. If you are looking for inflation, look there. My best guess is that they know damn well that inflation won’t stay there. If they did homework, they have learned from 2008. 

Central Banks wanted inflation and they got it, but not where they expected it. In 2008 they tried to keep stocks inflated. But it didn’t worked out that way, stocks took a dive and the liquidity went into commodities. Now we are back in the same situation, with the US stocks high and commodities depressed after they peaked in 2011. 

In contrast what lots of people think it, it’s not the job of Central Banks to keep prices stable as they always create more debt (liquidity for loans) than can be paid back. Keeping prices stable and a currency sound is not in their interest. That would limited their loan creating, money printing ability. 

So, if Central Banks know what happens next, they will try to prepare better now. 2008 showed that they can create liquidity, but they can’t control investors intelligence. As smart money knew stocks were at that time not a good place to stay, they moved money into commodities. Commodity prices turned up. 

If Central Banks can’t beat investors intelligence, they might try to play the game another way. In my former post I wrote that Central Banks are partnering with government, they aren’t regulated by government. Big difference. 

Why would debt loaded Western governments going full swing into climate policies that require even more debt to execute? To get control over assets that produce commodities. From assets that produce energy as oil and gas to farms that produce food commodities. 

Is it crazy thinking that Central Banks would use the regulating power of government trying to regulate commodity inflation?  Maybe not. Green energy is less efficient than fossil and nuclear power. And the manufacturing of wind mills, solar panels and electric car batteries all require a tremendous amount of natural recourses. 

Energy prices are already on the rise. The regulations that come with climate policies are an attempt to kill healthy market forces as people, as least in here Europe, are going to be forced into renewable energy schemes. 

Christine Lagarde, president of the ECB shows that this line of thinking makes sense: “In a strong hint that as president she would move the ECB beyond its traditional remit of controlling inflation, Lagarde said the bank would incorporate the climate threat into both its economic forecasts and in its capacity as watchdog of the financial system.”

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