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Why Are Central Banks Among The Most Hated in America?

Posted by Brock Bowers on

What if you knew the one conviction about 2017 from a $284+ billion asset management firm?

Could you benefit personally?

Imagine for a moment that you are sitting across from Baring Asset Management’s Christopher Mahon in one of his offices spread across 17 countries…

What if he leaned in and told you what he was doing to make sure his firms $284+ billion in assets continues to be “safe from meddling.”

“This year is the turning point,”

Mr. Mahon said in an interview with Bloomberg News.

“For seven years or so, central banks have largely escaped critique even though one could argue that their policies have been pretty inadequate in many senses.

It’s very plausible now that politicians stand up and throw stones at central bankers.”

Donald Trump has harshly criticized the Federal Reserve  for creating a “big, fat, ugly bubble” in the market by holding interest rates near zero.

Why are Central Banks among the most hated in America?

For starters, the Federal Reserve may be underreporting inflation.

“Inflation Is Actually Near 10%...” 

Says CNBC in a headline article.

Even members of the central bank must believe inflation is being underreported.

Dallas Federal Reserve President Richard Fisher said in a speech that the central bank was reaching a “tipping point”

“The need to break the back of that spiral is as dire now as was the need for Paul Volcker to break the back of inflation in the 1980s,” said Fisher from the Federal Reserve.

Rather than getting inflation under control (and saving American’s purchasing power) Fed President John Williams suggested they will aim for higher inflation!

The Fed is expected to resort to extraordinary measures like additional bond buying  (QE) or negative rates to stimulate the economy in the face of a renewed downturn says Market Watch.

Is there any doubt as to why we are in the economic trouble we are in?

"The Fed will have to have to reverse course, which they’ve done eight times since 2013."Says New York Times best selling author of currency wars Jim Rickards.

"This is a recurring pattern. It will talk tough, raises rates, the market will fall out, the Fed will back off."

Switching from central bank policy to advising people to remove themselves from financial institutions journalist Nomi Prins’ remarked,

People must be prepared...

In the event of a separate financial crisis of any kind.

There are issues that have still not been cleaned up in the financial sector, that is built on codependency between banks, and we could see a lot more of what has happened in Cyprus and Venezuela come into core markets.

This would require banks to “batten down the hatches” on the liquidity they give to their customers, particularly if they are concerned about liquidity or credit problems.

"In that event, it is better to have more cash out of accounts that are effectively receiving zero interest rates, or close to zero, anyways. They could use that to buy hard assets, to pay down certain debts and to maintain as more liquid as individuals in terms of money on hand, as opposed to money in a bank.”

(To catch the full interview with Nomi Prins on Yahoo Finance covering greater corporate defaults in store for 2017 and what is on her financial road map, Click Here.)

For those who lose faith in central banks, gold may be the last holdout. It retains its appeal as an asset that once underwrote the monetary system and it can’t be created at will like currencies and bonds, said Economist Matthew Turner in Bloomberg.

“Gold used to be the center of the global financial system, for that reason it has a reputation as a currency -- but as a currency that’s not issued by governments and not controlled by governments,”

The $284+ billion Baring Asset Management’s Christopher Mahon says he's "seeking shelter in gold."

His conviction on the politicization of central banks is one that will play out over several years,

making gold a safe bet for the long term.

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