Central Bank Hubris

In late 2017, I wrote a research report entitled “Central Bank Hubris.”  In it, I quoted a line from C.S. Lewis and that quote was; ‘It is not the assumptions that are discussed in society that are dangerous, but the one’s that are implied.’

At that time, I felt the implied assumption in the market that the Fed (and other Central Banks around the world) was infallible and could do no wrong was a massive issue then. And to be completely frank, I think this situation has only gotten worse.

Because of this implication that the Fed was infallible, I wondered aloud in that report what a mistake by the Fed could look like. In fact, here is a quote from that piece…

“What happens if the Central Bankers make a mistake?” Looking beyond the accepted ideas of what a Central Bank mistake looks like, I can see that they already have made a mistake! And that mistake is that they have meddled so deeply into the functioning of the markets that there is no way they can stop without completely disrupting the same markets they’ve been trying to “save.”  

This mistake of over-meddling is leading us down a path of massive money printing and currency debasement and a pile of debt that, in my opinion, can never be paid back. And with this, the door is open to things like Bitcoin, Modern Monetary Theory, and a strong basis for more and more Central Bank control of the economy.

In this type of environment, some asset classes and specific investments are truly attractive while others, even though traditionally thought of as essential parts of a portfolio, become truly unattractive to many investors over the long term.

Regardless, this market environment isn’t boring as we appear to be on the precipice of major social and geo-political change.

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