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Albert Edwards: central bankers will be next 'sacrificial lambs'

Socgen's bearish strategist believes central bankers could be the next victims, as public anger sweeps through the West.

Albert Edwards: central bankers will be next 'sacrificial lambs'

Albert Edwards believes it is only a matter of time before an angry public turns on central bankers, in the age of populism. 

Société Générale's bearish analyst strategist, who has been one the most vocal critics of quantitative easing (QE), did not hold back in his latest attack on central bankers. 

'While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE,' he said in his latest investment note. 

'In an age of “radical uncertainty” how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty - unelected and virtually unaccountable central bankers?

'I expect central bank independence will be (and should be) the next casualty of the current political turmoil.'

Edwards noted evidence of the monetary madness on asset prices is everywhere, from a parking spot in Hong Kong which sold for a record HK$5.18 million (£524,000) to the 3.5x oversubscribed 100-year Argentine government bond.

'Sure, everything has a market clearing price, even one of the most regular defaulters in history. But what concerned me most about the story was it was demand from investors (”reverse enquires”) that prompted the issue,' Edwards said. 

'Is it just me or can I hear echoes of the mechanics of the CDO crisis? But no one cares when the party is still raging and investors, drunk with the liquor of loose money, are blind to the inevitable catastrophe that lies ahead.' 

With the global political situation incredibly fluid and unpredictable, a furious electorate has turned its pent up anger on the establishment's political parties, he notes.  

However, Edwards believes the target of their ire is misguided. 

'I am not completely alone in thinking it is the unelected and virtually
unaccountable central bankers who are primarily responsible for the poverty of working people and who will be ultimately held to account in the next crisis.' 

He added: 'In the immediate aftermath of the 2008 financial crisis, politicians skilfully diverted the publics’ anger away from themselves by scapegoating "the bankers".

'After another eight years of economic stagnation that excuse no longer is tenable and politicians themselves are now taking the flak. But citizen revolutionaries will, I think, soon turn their fire on those
who I believe are truly responsible for their plight.'

In previous comments, Edwards has highlighted how central banks in the US and UK had deliberately stoked up massive housing
bubbles prior to the global financial crisis (GFC) to disguise the rapid rise in income inequality in both countries.

These rapidly rising house prices, he argues, allowed the middle classes to maintain the illusion they were getting richer so that despite stagnant real incomes they could continue to consume by extracting housing equity. 

Edwards said:  'After the GFC central bankers have collectively spent the last decade stepping up the pace of money printing to new extremes in an attempt to drown the global economy in liquidity, while couching their actions in plausible theories such as "secular stagnation".

'There is no recognition at all by central bankers that it may well be their own easy money and zero interest rate policies that are actually causing the stagnation in growth while at the same time wealth inequality surges to intolerable heights.

'Yellen et al will inevitably be sacrificed at the altar of political expediency as citizen rage explodes.' 

After the recent political turmoil in the US and UK elections, the defeat of the far right in recent French and Dutch elections provided some relief. 

Edwards does not believe this marks a dramatic shift in the tide towards radicalism though, believing there will be more political and establishment victims before it is over. 

And ultimately he believes this could result in central banks losing their independence. 

'For as the next inevitable economic and financial collapse comes ever nearer – a consequence of yet another global asset bubble bursting – politicians will be looking for the next sacrificial lambs to throw to the wolves,' Edwards said. 

'It’s hard to believe Yellen, Draghi and Carney won’t be those bleating lambs. But then the mob will devour the very independence of those institutions with the connivance of a political class willing to do anything to save their own skins.

'And if I am right and it is clear for all to see that the central banks have caused yet another GFC, of 2008 proportions, I personally believe central banks deserve to lose their independence, and
indeed much more.' 

 

 

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