How Many More “Saves” Are Left in the Central Bank Bazookas?

The master narrative of the global economy shifted six years ago from “China will push global growth for decades to come” to “the central banks can push global growth for decades to come.”

Time after time we’ve witnessed enfeebled global markets jolted out of terminal declines by central bank pronouncements and new money-printing policies. Never mind that the European Central Bank’s (ECB) Mario Draghi had no concrete proposals in hand when he announced the ECB would “do whatever it takes” to save the European Union from the financial consequences of its reckless abandonment of risk management; the mere announcement was enough to trigger a massive reversal in global markets.

The major central banks have tag-teamed one rally in global stock and bond markets after another: the U.S. Federal Reserve goosed markets in 2008, 2009, 2010, 2011, 2012 and 2013, only ending its various quantitative easing (QE) money-emitting programs in late 2014.

The ECB saved the day with Draghi’s “whatever it takes” PR gambit and more recently with its own QE money-printing program.

The Bank of Japan (BOJ) injected monetary amphetamines into global markets with Abenomics, a last-ditch effort by the BoJ and the government of Japan to crush the value of the Japanese yen and import inflation.

The People’s Bank of China (China’s central bank) has kept the credit spigot open wide for years, unleashing one of the greatest credit expansions in recent history.

China’s central bank balance sheet has doubled since 2009, but the star attraction in China’s debt bubble is bank credit. Compare China’s bank credit with that of the U.S.. Measured in dollars, the U.S. GDP is $17 trillion and China’s GDP is $10 trillion; measured in purchasing power parity (PPP), the two economies are roughly the same size.


The remarkable success of grandiose pronouncements, money-printing programs and serial expansions of credit raises a key question: how many more “saves” can the central bank bazookas fire that will have the desired effects of maintaining perceptions of central bank omnipotence and pushing global markets ever higher?

The Dow Jones Global Index (DJW) offers a snapshot of global markets. Since the last big central bank “save” in 2012, the index has lofted ever higher, staying comfortably above the 50-week moving average (MA).

But this era of central bank-induced euphoria appears to have ended in mid-2014; since then, price and key indicators have trended down. Recently, price has slipped beneath the 50-week MA and is struggling to overcome this line that was once support and is now resistance.

Though central banks have continued their ceaseless public-relations campaigns and kept various credit and money spigots wide open, this chart strongly suggests the central bank bazookas are losing their effectiveness. Iin other words, the returns on both PR and money/credit issuance are diminishing rapidly.

These diminishing returns may result at least partially from the end of the Federal Reserve’s massive monetary/credit expansion, which is reflected by the Fed’s balance sheet (courtesy of Davefairtex/

After quintupling from $871 billion in 2008 to $4.5 trillion, the balance sheet has leveled off as the Fed ended its QE program.

Other central banks have kept their money-printing/credit spigots wide open, but it's looking like the Fed’s decision to end large-scale money-issuance of U.S. dollars into the global economy cannot be replaced with euros, yen and renminbi (a.k.a. yuan).

Saved by Cheaper Energy?

The astonishing collapse in oil prices has provided an unexpected (by most analysts) tailwind to the world’s manufacturing/consuming economies, even as it has dealt a crushing hammer-blow to oil-producing/exporting economies.

While there are obvious pluses and minuses to the cost of oil falling in half (when priced in U.S. dollars), the fact is that the major manufacturing/consuming nations have far larger economies than the oil producing/exporting nations (the one exception being the U.S., which is both a major producer and major importer of oil). So the advantages of lower oil prices for manufacturing, transportation and end consumers on a global basis outweighs the damage to the energy sector globally, which is roughly 5% to 10% of global GDP, depending on the current prices of energy:

Though many mainstream media sources are claiming oil will decline to $30 or even lower, and stay there for years, others are skeptical of this “cheap oil forever” projection based on the rising cost of extracting oil globally. Since the majority of the cheap-to-extract oil has already been pumped, what’s left costs more to extract when measured in energy (energy returned on energy invested—EROEI) or money.

Since oil is priced on the margin, relatively modest changes in supply and demand can move prices far more than many expect.  The recent uptick visible in this chart suggests those expecting oil to drop to $30/barrel and stay there indefinitely might well be as wrong as those who thought oil would hover around a permanently high plateau around $90 - $100 last summer.

While the tailwind of lower energy costs has been welcomed in most of the world, the economics of oil do not lend much support to the expectation of $30/barrel oil lasting indefinitely. Lower prices will eventually cause producers to shut-in wells, rapidly reducing supply, while rising consumption in oil-exporting nations will continue to reduce the quantity of oil available for export.

In other words, it’s not just the quantity of oil that’s being produced globally that counts—it’s the quantity that’s available for export that really matters.

The tailwinds of lower energy prices might be as ephemeral as the tailwinds of hot air (PR pronouncements of the “whatever it takes” variety) issued by central banks.

The Destabilizing Rise of the U.S. Dollar

Just as the collapse in oil prices was not controllable by central bank jawboning or emissions of money/credit, it appears the strengthening of the U.S. dollar—a move that has destabilized emerging market economies and currencies—is not entirely in the control of central banks:

I have covered the dynamics of this destabilization in several prior articles over the past several months, including The Dollar May Remain Strong For Longer Than We Think and The Consequences Of A Strengthening US Dollar.

In essence, carry trades (i.e. borrowing in one currency and investing the proceeds in another currency) that were profitable when the dollar was weakening have reversed, turning into losing trades.

The more the dollar rises, the greater the losses in these carry trades, and the greater the incentive for those still in the trade to sell emerging market assets and currencies.

The flood of dollars unleashed by the Fed’s QE programs washed over the entire globe, encouraging people in emerging markets to take loans denominated in dollars. Now those loans are increasingly burdensome, as it takes ever-larger sums of local currency to service the dollar-denominated debts.

In response to these massive outflows of capital, emerging nations must raise interest rates to offer incentives for capital to stay put, which then causes the cost of new loans (and doing business in general) to quickly rise to painful levels.

As the currencies suffering outflows decline against the dollar, imports become more expensive and exports lose value when traded for dollars. It’s a triple-whammy for emerging nations: their borrowing costs are soaring, the capital leaving to pay off dollar-denominate debt leaves them starved for investment capital, and their imports rise in cost as their exports earn less.

As I have often noted, the failure to address the structural problems that caused the Global Financial Meltdown of 2008-2009 effectively transferred systemic risk to the enormous foreign-exchange (FX) market, which is connected to virtually everything in the global economy.

This is one key reason for the diminishing returns of central bank policies: all central banks have succeeded in doing is pushing the systemic risk into an arena they do not control.

In Part 2: What Will Happen Next For The US Dollar we explore just how far the destabilizing effects of currently in play in the currency markets -- currency wars, Triffin's Paradox, increased FX volatility -- are likely to threaten the global economy. It's very important to appreciate how the consequences of such global destabilization are not as controllable as relatively stable stagnation we have become used to over the past several decades.

In short, buckle up.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

This is a companion discussion topic for the original entry at

I appreciate the clarity of your explanation of this complex topic here and in Part 2.  Those of us without financial backgrounds require this kind of meticulous attention to explaining even the basic principles clearly. 

Thank you, S_P!  I think another basic principle in play is: We have forgotten what a somewhat-free market even looks like, after six years of constant manipulation and repression. Free markets can unwind fast and disrupt the best-laid plans, and the FX market is the freest market left–too big to repress forever and too volatile to control once losing trades start unwinding.

Just consider that ISIS black market oil may be driving down the price of oil…  and considering that Osama Bin Laden, Saddam Hussein, and others have all been CIA stooges …

… and considering that by Occam's Razor, what has already happened for a long time is likely to continue happening …

… and considering that all ISIS puts out their videos with themselves hooded, and Brits and Americans keep on turning up as the members…

… then let me posit that ISIS may be one of the CB tricks you think they're running out of, and all that beheading may be just what they have in mind for the future, too. 

I don't know if ISIS is, or isn't, a western or a Masters-of-the-Universe creation, but I'm not willing to bet that the evil-powerful masters-of-the-universe are suddenly without power.  I'm more inclined to think that the game rules have shifted, and I haven't figured out what they are.

I guess, I find lacking both the conspiracy theory, and the theory that "we're going to see a sudden big change because, well, it's just gotta happen",

So in light of that, I'm going to predict:


Whatever is gonna happen, is most likely gonna happen.  And you'll see it with your own eyes, if you're alive and happen to be there, and don't close them.

Central banks are trying to save our financial system.  Their preferred solution is to stimulate growth. Failing this they will have to reset debt.
World growth is in terminal decline which will go negative eventually (shortly ?). This is due to factors out of their control, namely World Net energy production is peaking.  Once the sheeple realize this the markets will correct.

To reset debt, central banks could do loads of things.  Here are two from the top of my head.  They could replace their currencies with replacement devalued currencies, thus slashing debts and liabilities in one fell swoop (as they will be still be denominated in the old currency).  They could give everyone a lump sum that must be used to pay down their debts (the resultant inflation would have much of the same effect as my first suggestion).   You just need a bit of imagination.  What they both have in common is to redistribute wealth from people who have loads of money (savings) to those who don't have enough (debts).

People are not going to like what I write, especially those of you who don't understand the nature of money creation and debt!!  People believe they have the right to keep money they have saved.  Wrong. ALL  the money you have saved was created as debt and this has to be repaid eventually even if you personally don't owe the debt.  

Ha ha. Bet I get no thumbs up (as usual) !

I will give you a thumbs up too because we all need to wake up to the nature of the system… and you lay it out accurately in my view.  This comment is the very definition of financial repression;

What they both have in common is to redistribute wealth from people who have loads of money (savings) to those who don't have enough (debts).
You go on to say,
People believe they have the right to keep money they have saved.  Wrong.
If I convert my "money" savings in to solar panels, and Iron-Nickel batteries, and soil amendments for my garden, and some Silver too... does that amount to savings (you can keep) in your view?  It does in mine.  


I absolutely agree that solar panels and batteries and soil amendments and silver are savings that you can keep.  It doesn't appear that my opinion is the one that matters; when the laws (rules) change, so do the things you get to keep.  Cherihuka had this concern earlier this week, in the context of hope (or the lack thereof).

They're trying to destroy the current financial system, in order to bring about a new system that will be their "reset".  But before destroying it, they're going to squeeze as much out of the lower 99% and give it to the rich/uber rich.  

This has all been said by the elite in either their writings, actions or by their own mouths, but very few seem to want to hear the truth.

And sadly ( or sickeningly imo), the current financial elite will continue to be in control of the new system as well!  

Mark my words on this, it's coming.  My prediction is 20017/18.  


Jim H and Iunableu22: By buying solar panels and batteries you are spending your savings. In doing this, your saving are now back in circulation.  The factories making solar panels and batteries can use this money to pay back some of their loans, they pay workers who in turn pay back some of their home mortgages etc, etc.  Also by buying solar panels and batteries, you are buying tomorrow's energy at todays prices.  Very wise.
LogansRun:  The richest 1% have done phenomenally well under the present financial system. I think they'll think twice about resetting it.  Their interests are to keep it going for as long as possible, surely.  The present difficulties are not a conspiracy by the rich.  It is because we are entering a new phase in human history; one in which Net energy production is peaking and declining; something humans have never experienced before. 

Sorry climber, you're wrong.  Not trying to be disrespectful but, my former employers are the people pushing this agenda.  It's taken longer than I thought it would, but it will happen.  
BTW:  the "reset" only means that the people with the currency and "riches" will have preferential treatment when exchanging for the new currency.

don't ever underestimate the elite and their agenda.  They're very well aware of the energy/ growth interconnection.  I have that from many many conversations with the elite in the military, finance, and govt…they're not dumb.  But they'll never tell it to the masses…

Thanks LogansRun.  What you say is very interesting and I can't counter your argument. You may be correct.  The Ukraine situation has taught me that the powerful can get away almost anything.  They control governments and the media.  However is it also true that their success rate lately has been poor.  Outcomes can be unpredictable, even for the powerful.  Can they control our energy descent?

The present difficulties are not a conspiracy by the rich.
The banker corporate military industrial complex has co-opted all checks and balances at this point.  I appreciate that Logan's is still up for jumping in to the commentary from time to time.  

I think the best analogy here is the way that TPTB painted themselves, through the media, after 9/11.  Bumbling… "failure of imagination".  Yeah, right.  You can bet there are reset plans… the super wealthy are not dumb.  One of my buddies had a DoD client of his ask recently where to procure Gold. 

  I don't pretend to know what the plans are, but I would suppose they include good helpings of;

*  Less Constitution, more tyranny.

*  More Globalized control (see TPP)

*  More globalized money… maybe SDR's for trade settlement.

*  More digitization of money… less or no cash.

Anything else?  Bankers?  Logan's?

Hey LogansRun,
I wasn't sure what you were replying to when you told Climber that he was wrong.  Do you claim that the present difficulties in the world are entirely brought about by a conspiracy of the elites and that even the energy descent is their doing?  

Was it the elites that determined when conventional oil production would peak?  Was it they who decided that burning fossil fuels would have a destabilizing impact upon the biosphere?

I, like many others here, agree that the elites control quite a bit and have even gotten away with some unbelievable things.  I am also open to the possibility that the elites control even more than I realize.  They certainly control more than I was aware of even a few years ago.

Nonetheless, just focusing on one factor when looking at a civilization - in your case the elites - seems to paint an incomplete and reductionist picture.  Surely Climber's point about energy descent is an important one.

The elites may have profited from the fossil fuel driven expansion, but they are not responsible for the fact that coal and oil have been integral elements of the industrial expansion.  Far from being the force behind the existence and the use of coal and oil, in the case of at least one dynastic patriarch - John D. Rockefeller - it was oil that created the elite, and not the other way round.

Nor are the elites primarily responsible for the fact that a world with way more expensive coal and oil is almost certainly heading towards contraction.  In fact, in studies of past civilizations, both Jared Diamond and Joseph Tainter point to environmental factors as being more important variables than mismanagement by elites.  Soil fertility and water supplies can change, but we can count on the elites to always be greedy; that's a constant.  So, if they were all powerful, how can we explain the fact that so many of past civilizations collapsed, and that previously great family lines become obscure or even died out?

The elites may be able to make kings and buy out nations, but they can't create free energy nor can they control the climate. And these are only two of the many things beyond their admittedly long reach.  While elites may be suppressing new types of energy technology in some cases, it very well may be scientific and engineering limits that keep undiscovered ways to harness energy out of reach are even more of a problem.

Elites are certainly powerful, but they are not omnipotent.  If they were, then the elites among the Greenland Norse and the Mayans would have successfully secured their survival, instead of - in Diamond's words - being "the last to starve." 



P.S. The psychology of focusing on the elites as the only source of all problems may be explained in part by behavioral economics.  In the words of Dan Ariely, via Chris, the elites have a face, whereas peak oil and climate change do not.  

Focus on the elites may also have something to do with the human - and especially Western - inclination towards dualism.  When we acknowledge that we are part of the problem too, simply by consuming as middle class people in an industrial civilization, then it's a bit harder to point fingers in only one direction.

Don't get me wrong, I'm happy to point my middle finger squarely at the elites, but that still leaves my index finger pointing back at me, as I am sort of an elite too, in terms of the amount of comfort and benefit I get from this industrial civilization, which is extracting the Earth's bounty at far beyond carrying capacity.  There are well over 6.5 billion others who are less comfortable and tax the biosphere less.  I wonder if they see me in the same category as these elites we're discussing.

Do you say "their success rate is poor"?

i don't see that at all.  What I see is exactly what I would expect.  Nothing that you see is NOT coordinated by these groups.  Sure, they have some hiccups but, most of what you see is exactly as planned.

i know its hard to believe there could be a small group of people with so much control of the system.  I didn't understand it for over 10 years of employment at a very high level within the organization!  So I can understand why an outsider wouldn't get it.  But, it's true!  Sick.  

As I said, things have moved slower than I'd expected and predicted when I first found  But it's coming to a head, and the pressures are mounting exactly as they'd stated they would (meetings from 2004-2007).  

Keep an open mind and NEVeR underestimate what a group of human beings are capable of doing to others of their species.  Especially sociopaths/psychopaths.


Hugh,  I'll leave you with something I've shared here before.


When I was "active" I would have an annual 4th of July party at my house in which, the rich and powerful of DC,  Military, NY, London, etc…would attend.  During this party in 2009 (it could have been 2008) I asked a 4 star Army General if he'd heard of Peak Oil.  He stated he had.  I then asked him if it was "for real".?  His comment still resonates with me today!

Here's what he said:  "If WE say it's real, then what does it matter? …It's real". He then went onto state that, they're well aware of the situation and have made many contingency plans in regards to domestic, financial and military policies, all surrounding the effects of Peak Oil…"whether it's real or not":slight_smile:

So yes, they're aware of it and it's integrated into the future plans.  And IMO, it's hard to not see that if you keep an open mind.  But, that's just me.

Well said HughK, the elites are not omnipotent even if they think they are. What's unfolding is just so  tremendously unpredictable. (At this point I'll resist the temptation to climb on my hobby horse and rave about the dynamics of complex adaptive systems - read any of David Korowics 's work if interested; www.
But I'm also reminded of  Dimitry Orlov's 5 stages of Collapse (as presented on this site a while ago.  To recap, the stages are Financial, Commercial, Political, Social and Cultural collapse. The point at which elites (and all of us) really come unstuck is commercial collapse. This is where critical  infrastructure starts to crumble beneath our feet  - didn't I hear Gail the actuary talking about this very issue a couple of weeks ago in relation to oil companies? Critical failures would likely occur in the transport, energy, communications sectors etc due to financial system failure. Resulting problems could then cascade through all sectors of the economy. And the more critical failures the more difficulty in containing the damage…

I don't doubt the intention of some groups to control the situation for their own benefit. But I do doubt their ability to actually do so beyond a certain point.

JimH wrote (harmonizing with Logan's Run, etc.):

I don't pretend to know what the plans are, but I would suppose they include good helpings of;

*  Less Constitution, more tyranny.

*  More Globalized control (see TPP)

*  More globalized money.. maybe SDR's for trade settlement.

*  More digitization of money.. less or no cash.

I see all of that too, as it's all currently under way, and logically fits in with the next "stage" (whatever that is).  Jim Rickards has written extensively about the IMF "bailing out" the world at the next crisis, converting fiat sovereign debt into SDR/globalist debt and keeping the current pillaging paradigm going longer. That makes sense too and fits into current trends (but we'll need a race of aliens from another galaxy to bailout the global debt when it too collapses ).

I agree with Logan's Run that there IS actually an "elite" who have conceptualized the whole process and are pulling the levers of power to enrich/empower themselves while keeping the whole rotten carcass floating downstream pretty much as they have planned.  (I most admire their patience to keep at this for decades and their ability to seamlessly incorporate new blood into their "conspiracy" as the old blood ages out and dies. However, there is a hot place in Hell reserved for them.)  A question I'm having with myself is: am I becoming more able to see their fingerprints on what is happening (including a growing ability to predict what will come next) OR are they simply becoming bolder/more desperate and taking more actions out of the darkness and in the light/twilight?

I also agree with HughK that these "elite" are not omnipotent and are subservient to math and physics (to name just two) and have cracks of significant vulnerability.  Things don't go exactly as they'd wish nor can they be 100% confident of getting their way at all times in the future. Six sigma events do occur.

The sociopathic elite who would engineer their own power and wealth and cast off 5 or 6 billion people without batting an eyelash could be exposed and removed, with prejudice, if only "we the people" would wake up and wise up.  However, the possibility of that appears to be one of those six sigma events/moments I'm not holding my breath for. I read this quote recently and I know it's not true about many people, but I'm having trouble convincing myself it's not true about the majority.  It seems this is the attitude of the elite toward us.

“Considering mankind’s indifference to freedom, their easy gullibility and their facile response to conditioning, one might very plausibly argue that collectivism is the political mode best suited to their disposition and their capacities. Under its regime the citizen, like the soldier, is relieved of the burden of initiative and is divested of all responsibility, save for doing as he is told.”

Albert J. Nock

My prayer is for an act of God that demolishes TPTB and gives us a chance to rebuild from the ground up without the sociopaths in charge. It's happened many times before.

Temperamentally, I'd like to fly the Millenium Falcon, against all odds, into the heart of the Death Star and blow it to smithereens.  However, I don't have a Millenium Falcon and I don't know the Death Star's weak spots so I'm focusing on not getting caught up in the next wave of destruction that is just ahead of us.  Lay low. Hunker down. Live to fight another day and participate in the rebuilding or the revolution, whichever it will be.  Toward those ends I'm making the preparations we're all familiar with here at PP.

"Welcome to the Hunger Games. And may the odds be ever in your favor."


Very decent explanation with quite good points being expressed in an impressive way.

Not ignoring, just busy.

I'll respond tomorrow morning.  Sorry.