Only governments can get central banks unhooked, and they're incompetent
Third Point hedge fund titan Dan Loeb is on the wires. He grabbed headlines saying central bankers have relied too much on monetary policy to stimulate growth.
"We must take the crack cocaine pipe away," he said.
I don't know who he means when he says 'we'.
Because markets are the dealer. Market participants are getting rich slinging rock.
The only ones who can take it away are governments. Sure, central banks could take some kind of stand and say enough-is-enough but that's just not going to happen. Ultimately, central bank independence is an illusion. If they dig in their heels and tell governments to get to work, the leaders will be replaced.
Look at Europe, where Draghi told governments they needed structural reforms at the height of the crisis. The reforms hardly came. What did come was ECB bond buying and that's driven Italian borrowing costs to 1.28% from 7.5%. Italy remains a no-growth basketcase.
What started as a dalliance in experimental monetary policy has turned into hardcore habit and no one is going to take the crack pipe away.
