From bailouts to loans to merely passing a euro or dollar. Central banks are pretty much at the end of the road and have exhausted their resourcefulness to stop the economic bleeding in the U.S., the eurozone and abroad.
There comes a point in every financial situation where there is nothing more that can be done to resolve a dilemma and it is time to cut the losses and begin the reform.
What nation or currency will make the first move in this effort? First, looking at the overall picture political leaders are not about to face reality and admit the failings for fear of jeopardizing their political careers. Regardless of the fact that the overwhelming blame can be placed upon their fiscal irresponsibility, it still will not rectify inflation or blundering a fiat currency into further national debt. The answer remains when it comes to a re-election or campaign year, the campaign platform will take precedence. The political figures have their constituents and their votes as priority over the banking of a nation and its financial woes.
Banks in response to political agendas are still about protecting the interest of their shareholders and will not aide in the process of economic reform. They are merely in reactionary mode to the political practices coming their way.
So as central banks are running out of options combined with coasting to the political finish line of an election, there will not be anything securing debt reform. It simply is not a political platform for securing an election to address debt reform and any reference will be seen as campaign rhetoric.
Current economic reform in Europe has forced political leaders to react by seeing another quarter of hope for economic stability fading off into a financial inferno. Spain and Italy are expected to be the next up in the eurozone of economic disaster, while new jobs in the U.S. are declining, slowing signs as well in China, while on top the Chinese are expanding their gold reserves. The forecast for economic growth worldwide was lowered 0.2 percent from May’s 3.4 percent and is also declining.
The Bank for International Settlements (BIS) said in their report last week that they are now seeing monetary policy limits due to $18 trillion in assets representing 30 percent of the global gross domestic product (GDP). This amounts to double from about a decade ago even while interest rates have been at their lowest level since that time.
BIS goes on to add that various governments have put banks in the position of essentially holding back on any further stimulus efforts. Thus preventing them from seeking additional financial support for restoring their financial status. As we have seen with the past efforts of monetary policies implemented, they only buy time on a shortfall which is only going to end up in the future with a risky financial position for banks.
The failure of banks resulting from bad political decisions, has added to the lengthy periods of unresolved debt, and also an increasing loss of confidence in the financial and fiat currency systems around the world.
In the emerging countries with a driven global economy, the Asian influence in the manufacturing world has been to replace manufacturing operations in Western civilizations. Leading the Yuan currency to work its way up to the level of the Dollar resulting in an Eastern shift impacting the developed civilizations of the West.
IMF representatives have been also watching this and are nervously looking over the performance of the euro by giving it a limited timeframe for its resolve. Soon they say the eurozone could be seeing deflation set in. A position which central banks have very much been concerned over its occurrence.
It explains why there is still a position of lack of acceptance of gold as tender simply because of lack of its use in the financial system. The position of which gold has not yet to attain many in the financial sectors do not want to also give any confidence in.
Central banks have not forgotten the inflationary positions that they have been In so much so the position of deflation is definitely not one of desire for them. The last several years the U.S. saw a similar position following the security backed mortgage market end up getting dropped on banks financial records. Resulting in banks then hindered in their efforts to borrow.
European banks hit the hardest from unresolved debts also saw their securities declining in value resulting in insolvencies. Leading to lowered consumer confidence with citizens then pulling a devalued fiat currency from their accounts. With confidence at its all time low banks were then required to limit withdrawals in an effort to stop the bleeding of their eroding growth. Resulting in banks now being in a deflationary position.
Out of bailout practices, central banks received liquidity to accounts for unresolved debts in an effort to restore their lending power but it only contributed to deflation already present. With global nations slowing in growth and deflation settled in, exports under normal conditions would be sought to provide economic gains, instead nations have turned inward for solutions and have abandoned exporting.
With sluggish economic growth resulting in lowering consumer confidence in government and central banks, there has been a shift more toward slowing down and less on stimulating growth. A difficult position central banks never wanted to be in but now are stuck due to nothing further to offer.