To paraphrase the great man Michael Scott: I’m not superstitious but I’m a little stitious. Something like premature celebration, or not counting chickens before the embryos finish their time in their eggs. Don’t spike the ball at 5 yard line (let alone the 30).

In January 2014, Central Banking magazine handed out its first annual awards. After a tumultuous few years around the world, the initial honorees seemed to make a lot of sense. With growth projected to be on the rise, a full recovery after the awful and troubling experience of 2011’s false down, the official world began to hand out kudos.

First up, Mario Draghi was presented Governor of the Year after it sure seemed like his July 2012 promise to “do whatever it takes” had saved the euro (and more).

For Central Bank of the Year, that honor went to the People’s Bank of China. I recalled the eerily prescient (in a reverse kind of way) setup a few years ago:

If Draghi was league MVP, the PBOC was its champion apparently. In a very narrow sense, it might have seemed fitting given the struggles Chinese money markets went through in 2013. That summer was as eventful in SHIBOR as US tba MBS, if not more so.

Twenty-thirteen was an upsetting time for much of the world, including a currency crisis around the emerging market portion of it. The Chinese, so far as CNY had been concerned, ended the year apparently in good shape. The economy was strong, or so it was said, while the currency hadn’t been volatile like so many of its peers.

Within months, Mario Draghi’s ECB (June 2014) would start flailing with targeted LTRO’s and even negative interest rates (NIRP) – for reasons he never could adequately explain. Europe’s bond market did it for him, which made his eventual choice of QE (March 2015) all the more curious since interest rates were already declining, and had substantially declined, long before he started buying anything.

As for China, the PBOC had its hands full right from the outset – even while then-Governor Zhou Xiaochuan ceremonially accepted the credit. CNY stunned the world by reversing course, falling for reasons, like in Draghi’s Europe, nobody was able to illuminate (at least not that made any sense).

The decline, characterized wrongly as “devaluation”, hasn’t yet stopped (even if CNY is up of late).

Going back to what I wrote in 2018, on the cusp of full-blown Euro$ #4, in January 2014 they had been similarly on the cusp of full-blown Euro$ #3 with all the same sets of confusion; not that any of them would know it despite the prestigious honorifics being bestowed for qualifications that must not have had to do with competence and knowledge:

The deflationary impulse that swept through the global economy in 2012 was real and massive, not something that QE3 and QE4 in the US could ever have handled (it didn’t). Mario Draghi’s “promise” that same year was a similar sideshow. All they accomplished was creating false expectations, the distance between economic reality and increasingly forlorn hope in commodities first before everything else following in 2014 and 2015.

Again, the parade had been scheduled prematurely. China, perhaps most of all, is nothing at all like what was being imagined for it, and what it needed to contribute to the rest of the world, late in 2013. The real issue, then, is why didn’t anyone know this because all the warning signs had been accumulating all throughout that particular year?

It sounds like something central bankers should know. Alarms in January 2014, not awards. These building dollar issues take time, warnings all throughout 2013 that led directly to the much bigger, more catastrophic problems showing up later next year and throughout the one following it (2015). 

History, of course, repeats. You can probably already guess where I’m going with this; just being a little stitious about such news released by the Central Banking magazine folks earlier today:

Not only did Jay Powell’s gang perform awesomely, in the magazine’s view, in doing so, note the highlighted subhead above, US policymakers set an example for the rest of the world (looking at you, Japan and Europe). Not only was March 2020 a challenge the award-givers say was overcome, there was also that introspective regime change unleashing the average inflation target!

A model the rest of the world should immediately follow and adopt:

That financial markets did not completely break down was primarily due to the actions of one central bank, the US Federal Reserve. Under the stewardship of its chairman, Jerome Powell, the Fed acted rapidly and boldly to avert a meltdown – not just in the US, but in markets across the world. The Fed pulled out all the stops in its efforts to shore up US dollar liquidity. And it did so extraordinarily quickly.

What’s funny in a non-comical serious way is that the one market which even today the Fed keeps looking back on nervously which did clearly break down was the all-important Treasury market. They’ve talked about it in communications, speeches, and statements (including the last one) as a point of both pride and concern ever since it happened.

But, like China in early 2014, or Europe, there are any number of warning signs that they’ve been reading these things all wrong; just when they thought everything was going right, they turned horribly wrong. Specifically with Treasuries in March 2020, the mainstream, Powell version is that the Fed stepped in and saved the market from selling it couldn’t handle; as if the problem was the Treasury market rather than, you know, such massive forced selling.

The FOMC minutes just described a situation that was so bad, collateral-wise, financial participants (which we know were largely foreign official entities) were forced to sell whatever they could, including UST’s, choosing only those which were OFR. At the same time, everyone had to pile into the OTR stuff, including all the bills, because that’s all that was left as acceptable. A true funnel or bottleneck.

These idiots, in addition to having been derelict in their currency duties, while busy congratulating themselves, they just wrote up and publicized to the world the very reasons they should all be terminated and the FOMC permanently disbanded.

In other words, why was there so much involuntary selling taking place in the first place?! Because Powell, like Bernanke, was incredibly bad at his job. It only seems otherwise due to the lack of another Lehman and the outright lies about flooding the world with digital dollars to which the mainstream is in another rush to credit the Chairman over.

And it’s that last part which is relevant to March 2021 just as Mr. Powell will seek to gain his award on behalf of the Federal Reserve. More and more, of late, it certainly has the smell of early 2014 like early 2018. These things do repeat because there’s no flood; not once.

The world was supposedly flooded with money back then, too, only it didn’t turn out that way. Why didn’t the dollar fall, and CNY among others, rise against it like everyone, and I mean everyone, had predicted? These award-winners still haven’t answered that little question.

I don’t generally believe in such things, such little let alone super stition, but what might Central Banking really be handing out here if not the kiss of death on reflation. Timing, they say, is everything.

The dollar just might agree. Just when you think it’s all clear, bam. Just who is Michael Scott in this setting?