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—
Tell me now, Stephen said, poking the boy's shoulder with the book, what is a
pier.
—
A pier, sir, Armstrong said. A thing out in the waves. A kind of bridge.
Kingstown pier, sir [...]
—
Kingstown pier, Stephen said. Yes, a disappointed bridge.
James Joyce, Ulysses
(Paris, 1922)
FIVE YEARS into the
global financial crisis so far, and where did zero
rates and $5 trillion of money creation get us?
To
the end of the pier, it seems.
"Having
built a bridge for other
policymakers and for healthy balance sheets in the private
sector," said Mohamed El-Erian, CEO of
bond-fund giant Pimco this month, "central
banks must now hope that a more timely, comprehensive and effective response
will finally be forthcoming (and push for it, as appropriate)."
Push
for a fix, they certainly do. All the developed-world's top central-bank
chiefs have long said the can't fix the world with
more money alone. Now they've started pointing to government, asking for
fiscal policymakers to take on the task instead. And they really have tried.
The Federal Reserve has grown its balance-sheet – creating money to buy
Treasury bonds and extend easy loans to the banks – at a 19% annual
clip since the summer of 2007. Here in Europe, the European Central Bank and
Bank of England have each swollen by more than 22% per year!
Now, this week, ECB president Draghi called for a
"growth compact"
from Eurozone governments to go with his flood of cheap money. Even US Fed
chairman Ben Bernanke said that he's been "extraordinarily accommodative",
and really, he'd rather not keep printing in the vain hope of juicing a
marginal, uncertain boost to the economy.
Bernanke's
own record might make that statement sound doubtful. But anyone who says Paul
Krugman is wrong – or even just hints it
– can't be all bad. And after kicking the can as far down the road as
they could, central bank chiefs really do seem hopeful that the fiscal
authorities will run into the box to collect their pass, ready to shoot –
and score! – between the jumpers for goalposts.
Because
"should [a government fix] fail to materialize," El Erian already said way
back in January, "central banks risk finding themselves having built
expensive bridges to nowhere."
That
phrase – "bridges to nowhere" – is most often used to
mock Japan's huge government spending of the mid- to late-1990s, when it
first struggled and failed to shake off its own post-bubble debt deflation.
Concrete was poured nationwide, with roads and bridges quite literally built
to take no one to nowhere, other than keeping
construction workers out of the welfare line.
The
fix which El-Erian and central banks everywhere now
hope for might not in fact work, in short. But either way, it hasn't yet
materialized in the West, where "austerity" (or what passes for it
a century into the welfare state's relentless growth) is only now facing a
solid political block.
Pending
that "fix" – of more debt on more bridges to nowhere, further
out into the waves – "[Central banks] will come under severe
pressure," as El Erian warned at the start of
this year, "with implications for the future of central banking itself,
as well as for the welfare of economies at the national, regional and global."
Couldn't
put it better ourselves. So we won't try.
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