Nestor was an Argonaut…In the Iliad, he often gives advice to the younger warriors….
Homer offers contradictory portrayals of Nestor as a source of advice. On one hand, Homer describes him as a wise man…. Yet at the same time Nestor's advice is frequently ineffective. Some examples include Nestor accepting without question the dream Zeus plants in Agamemnon in Book 2 and urging the Achaeans to battle, instructing the Achaeans in Book 4 to use spear techniques that in actuality would be disastrous, and in Book 11 giving advice to Patroclus that ultimately leads to his death.
Ambrose Evans-Pritchard is out with a piece, “ECB fears 'abrupt reversal' for global assets on Fed tightening.” The subtitle is telling: “The ECB’s financial stability report describes a 'fragile equilibrium' in world markets, with a host of underlying risks.”
“Fragile,” after seven years; “a host of underlying risks.” He is writing of the current financial calamity, taking unmistakable form in 2008, but in reality tied to events at least several decades old.
The roots can be found in the formation of central planning for money and credit – central banking. However, the most visible incarnation – this game of all financial transactions completely unhinged from economic reality – was fully formed on August 15, 1971, when Nixon closed the gold window.
Certainly, there were many manipulations prior to this date – the fact that Nixon felt this action necessary was due to the government fiscal and monetary shenanigans that preceded it. But this date is the most visible and complete sign of the total abandonment of any discipline when it comes to the subject of money and credit.
Yet Nestor is never questioned and instead is frequently praised.
As was Nixon; his move was greeted with cheers:
The American public felt the government was rescuing them from price gougers and from a foreign-caused exchange crisis. Politically, Nixon's actions were a great success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, "We unhesitatingly applaud the boldness with which the President has moved."
What do Nestor and Nixon have to do with this latest piece from Ambrose?
The global asset boom is an accident waiting to happen as the US prepares tighten monetary policy and the Greek crisis escalates, the European Central Bank has warned.
The ECB’s financial stability report described a “fragile equilibrium” in world markets, with a host of underlying risks and the looming threat of an “abrupt reversal” if anything goes wrong.
Even if you magnanimously start the clock in 2008, the wizardly central planners have had seven years to deal with whatever they deemed to be the underlying causes of this calamity. Ambrose lets slip that their advice – like that of Nestor’s – has been “frequently ineffective.” Let’s just call it ineffective – in other words, wrong more often than advice given by the man of Greek legend.
Ambrose laments the growth of shadow banking – outside the purview of regulators; yet in 2008 it was the institutions in the purview of regulators that were the source of problems. Banks are one of the most highly regulated institutions in the world – regulated by political actors and not the market (and in this one will find one major source of the problem).
He does not spare the banks, however:
While banks are in better shape than five years ago, their rate of return on equity has dropped to 3pc, far lower than their cost of equity. They remain damaged.
Damaged? Seven years later, they remain damaged? What kind of advice have these advisors been peddling for seven years? We know that their interventions have allowed short-term rates to stay at or near zero (with corresponding effect on rates of longer maturities) for most of this period. Hasn’t this grace period solved any underlying issues?