I have been following this guy at Alhambra for a while now. I think he is really onto the problem in the world.
Its about Eurodollar liquidity or lack of it.
Again, this shift in perception dating back to 2011 is important as it shows up all over the world. Before that point in later 2011, the recovery seemed at least possible if visibly insufficient and so it was plausible that policies like QE might work if given enough time and emphasis. After 2011, bank reserves were downgraded to fantasyland, leaving the eurodollar world without any legitimate form of financial backing; high risk, low (no) reward. Banks left and the global economy stagnated even though it had never recovered from the Great Recession.
The resulting paradigm shift in eurodollar money has been an equivalent paradigm shift in the economy. No matter what central banks attempt or propose, they cannot possibly succeed. That is what bond markets and interest rates have actually been declaring this entire time outside of a few discrete periods of euphoric, emotional mania (the last being the middle of 2013). Monetary conditions in the real economy are exceedingly “tight” and getting more so all the time. This has nothing to do with the business cycle, real or assumed. It’s not about recession, it is about depression; a more than temporary deviation from health. It is not, as noted last week, some indeterminate secular stagnation so much as eurodollar stagnation.
Unfortunately, the answer is not to increase the eurodollar supply because there is simply no way to do so. The eurodollar must be replaced, but our central bank “heroes” are busy instead coming up with ways to explain why QE didn’t fail (it was the economy’s fault). The end result is thus the familiar social and political upheaval that accompanied the earlier extremes in monetary imbalance. Hopefully it will be far more like the transition to the 1980’s rather than that of the 1940’s. The longer this takes, however, the likelihood of the former, I fear, decreases, while the potential for the latter grows. It might be tilted in that direction anyway since there are vast differences between monetary contraction and depression versus runaway inflation. As bad as the late 1970’s was in economic as well as financial terms, it just doesn’t compare to periods of prolonged idleness and deprivation.
Then you can read his 3 part series on the Eurodollar