Central bankers issue strong warning on asset bubbles

The Boston Globe has the article Central bankers issue strong warning on asset bubbles. I was looking for something sensible in this article.

The organization, which reflects a widespread view among central bankers that they are bearing more than their share of the burden of fixing the global economy, often uses its annual reports to send a message to political leaders, commercial bankers, and investors.

Well that certainly looked promising.  Monetary policy cannot fix what ails the world economy.  It needs some fiscal stimulus.  Let’s see what the central bankers recommend.

The organization said governments should do more to improve the performance of their economies, such as reducing restrictions on hiring and firing.

Well they missed that easy target by a mile.  Maybe they have some advice for corporations.

The organization also had harsh words for corporations, which it said were not taking advantage of booming stock markets to step up investment.

I wonder what part of the following scenario these bozos don’t understand.

Ms. CEO is pondering what to do next.  She responded to the economic crash by cutting back her corporation’s production, closed, plants, and laid off  workers because she wasn’t able to sell all the goods her  corporation was producing.

Now that she has reduced the production level to match the lowered demand, her corporation is making profits again.  In fact they are piling up.  She has already got research and development rolling to come up with new products that will make old products obsolete.  This is about the only way to get people to buy some more stuff because the people who have old stuff don’t need more, and the people who need more stuff don’t have the money to buy it.

Still the profits are piling up.  So Ms. CEO gives herself and her staff whopping income increases.  She ups the dividends to the stock holders, and investors flock to buy more shares so that they can get some level of earnings.

Still the profits are piling up.  Ms. CEO discovers that the corporation can play games with financial investments, derivatives, and financializing the company as an easy way to make even more profits.

She and her fellow CEO’s have trillions of dollars in liquid assets  that they don’t know what to do with.  Suddenly she makes a discovery.  The stock market is booming, her corporation is raking in money hand over fist, yet there is still no demand for more production output from her idle factories.  “I know” she says, “I’ll invest in cranking up my  factories so I can give stuff away for free.  That will fix my problem of too much profit piling up.”  Yeah, right!!!

So what is it that the central bankers expect corporations to invest in?  Does it take deep study of the latest theories in economics to understand the situation.  It’s as simple as “What part of no freakin’ customers do you not understand?”

Some experts are selling the idea that if we focus more wealth at the top of society, that will surely encourage more demand.  How many more  mansions, yachts, and private jets can one billionaire buy.  Eventually they run out of places to spend their money.  They certainly aren’t going to use their money to open up idle factories and hire workers when they already have factory output in balance with the now lowered consumer demand.

So central bankers and congressional experts of a right wing persuasion, I again ask,

“What part of no freakin’ customers do you not understand?”

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