--Man on Radio (The Day After Tomorrow)
Dr J points out the diminishing returns of monetary intervention. In addtion to the reduced impact on stock prices, he also shares the below graph that reflects increasingly diminished effect on the 'real' economy. Global PMI has been trending lower since 2010 and is now ticking below the 50 level indicative of recession.
Note also that the current trend is a continuation of a trend that was in place prior to the 2008 meltdown.
This should not be surprising, of course. Monetary intervention is the provision of liquidity. Stated differently, it is money printing. Printing money cannot provide economic resources that the world desperately needs to cover their debts while maintaining standard of living.
The world has a solvency problem, not a liquidity problem. And, as John observes, liquidity does not produce solvency.
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Policymakers will, as we’ve witnessed again recently from European politicians and central bankers, respond to heightened systemic stress by ratcheting up their responses. Yet, and also no surprise, these increasingly desperate measures will have depleted and fleeting effects – and really tend only to heighten market instability.
~Doug Noland
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