The Silver Age Of The Central Banker (Ends Badly)

(Before It's News)

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

zerohedge.com / by Tyler Durden on 02/20/2016 – 12:50

Submitted by Ben Hunt via Salient Partner’s Epsilon Theory blog,

For the past six plus years, ever since the Fed launched QE1 in March 2009, we have lived in an era I’ve described as the Golden Age of the Central Banker, where the dominant explanation for why market events occur as they do has been the Narrative of Central Bank Omnipotence.By that I don’t mean that central bankers are actually omnipotent in their ability to control real economic outcomes (far from it), but that most market participants have internalized a faith that central bankers are responsible for all market outcomes.

As a result, an entire generation of investors (we investors live in dog years) has come of age in a market where fundamental down is up and fundamental up is down. What’s the inevitable market reaction to real world bad news – any bad news, regardless of geography? Why, additional accommodation by the monetary Powers That Be, united in their common cause to inflate financial asset prices through large scale asset purchases, must surely be on the way. Buy, Mortimer, buy! During the Golden Age of the Central Banker, monetary policy is truly a movable feast for investors.

But the Golden Age of the Central Banker has now devolved into the Silver Age of the Central Banker, and monetary policy is no longer the surefire tonic for investors it was even a few months ago. In less poetic terms, the Coordination game that dominated the strategic interactions of central banks from March 2009 to June 2014 is now well and fully replaced by a Prisoner’s Dilemma game in the long run and a game of Chicken in the short run. As a result, monetary policy is now firmly a creature of each nation’s domestic politics, and the Narrative of Central Bank Omnipotence is in turn devolving into a Narrative of Central Bank Competition.

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