Swamponomics: IMF Admits It Printed Too Much Money

Oops, the central bankers did it again. They printed too much money, and now they are realizing the consequences of their disastrous actions in the wake of the coronavirus pandemic. But acknowledging their exceptional monetary expansion is a case of too little, too late as the world suffers from a serious case of inflation and market distortions, leading the global economy down a path of ruin and decay.

Kristalina Georgieva, the director of the International Monetary Fund (IMF), admitted that central banks worldwide "printed too much money and didn't think of unintended consequences."

"I think we are not paying sufficient attention to the law of unintended consequences. We take decisions with an objective in mind and rarely think through what may happen that is not our objective. And then we wrestle with the impact of it," she said during a recent panel discussion hosted by CNBC. “Take any decision that is a massive decision, like the decision that we need to spend to support the economy. At that time, we did recognize that maybe too much money in circulation and too few goods, but didn’t really quite think through the consequence in a way that upfront would have informed better what we do.”

Well, duh. Liberty Nation had been warning of the many problems that would transpire from firing off the mother of all bombs in these institutions' basements where the printing presses are installed. From rampant price inflation to food crises, LN had sounded the alarm on many fronts after the Federal Reserve launched the unprecedented QE4ever blitzkrieg and Washington approved the CARES Act.

Unfortunately, rather than try to correct their mistakes, Georgieva wants to double down and maintain a treasure chest of public policy interventions that will essentially repeat these same mistakes in the future. Despite the plethora of errors that the power brokers on the international stage made, they will never learn. But, you know, as the kids say, the Keynesians gotta Keynesian.

Gold Glitters Amid Inflation, War

Gold prices are trading at around $1,900 and have risen roughly 5% year-to-date. Despite rising interest rates, which increase the opportunity cost of holding non-yielding bullion, investors have been into the yellow metal as part of efforts to seek shelter from the geopolitical conflicts and inflationary tsunami flooding the world, according to new data.

In the first quarter, the total demand for gold bullion was 1,234 tons, representing 19% above the five-year average, the World Gold Council (WGC) reported. Retail investment of gold inflows into exchange-traded funds (ETFs) and demand for coins and bars were higher than the five-year quarterly average. “Retail investment was healthy compared with long-term averages and ETF inflows were notable, but so too was the absence of both futures and OTC demand, which suggests that investor participation in gold is not overcrowded and that ownership of gold is not over-extended," the organization stated.

Jewelry demand weakened, and net central bank purchasing was softer in the January-March period. Gold buying from China and India slipped. Production enjoyed a healthy 4% year-over-year jump, thanks to more robust mining output and more remarkable recycling levels. WGC report authors anticipate gold investment will be higher this year, consumer demand will come under pressure because of higher prices, net central banking purchases will climb, and mine supply growth will remain resilient.

The WGC study authors wrote in its quarterly update:

"For this reason, our range of potential outcomes for 2022 investment demand is wide. However, the strong start to the year and the lack of participation so far from both OTC and futures markets leads us to believe that there is scope and room for investment to be positive this year. Central banks are set to continue as net buyers albeit at a slower pace than last year. We attribute continued net buying to the results of our survey that find overwhelming support for holding gold in crises. But we caution that active management of reserves can also result in selling during crises to take advantage of gold’s abundant liquidity."

China’s New Anthem: Stayin’ Alive

The coronavirus outbreak, the COVID Zero strategy, and weaker economic growth have weighed on the Chinese financial market. The world's second-largest economy has seen the Shanghai Composite Index plummet more than 16% year-to-date, with a 7.2% loss in April. But the country's benchmark index rallied 2.4% on the Apr. 29 trading session, buoyed by promises of fiscal and monetary support measures. The Chinese yuan also strengthened against the US dollar.

China's chief public policymakers pledged multiple economic stimulus and relief instruments to ignite growth while also containing the growing number of infections. Authorities have been short on the details, but the Chinese Communist Party (CCP) announced new tools to improve macro adjustments, boost domestic consumption, bolster the property market, and defend supply chains in critical sectors.

"We should waste no time in planning more policy tools and enhance the strength of adjustment in due course,” the CCP's Politburo said in an Apr. 29 statement.

The Central Government and the People's Bank of China (PBoC) have already adopted mechanisms to cushion the COVID-related economic blows.

Last month, the central bank announced that it would trim the foreign exchange reserve requirement ratio (RRR) by 100 basis points to 8% starting May 15. The goal is to "improve financial institutions' ability to use foreign exchange funds." In March, the key five-year loan prime rate (LPR) was cut for the first time since April 2020, lowered from 4.65% to 4.6%.

Economic data have been lackluster as of late. The state and private-sector purchasing managers' index (PMI) readings (manufacturing, services, and composite) have contracted. Retail and vehicle sales have slumped, while industrial and manufacturing output is projected to decline in the next data release from the National Bureau of Statistics (NBS) because of lockdowns and public health restrictions.

What happens in China matters to the rest of the world since its lockdowns have exacerbated the global supply chain fiasco, and policy interventions would affect investment funds for foreign investors. Experts purport that the only way China can move on is to abandon its COVID Zero strategy, but footage emanating from the Red Dragon suggests that officials are adamant about bringing case totals to zero. Do they know this will decimate their Five-Year GDP Plans?