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Gotta love this quote

November 5, 2014

Zimbabwe’s stock market was the best performer this decade — but your entire portfolio now buys you three eggs.  —Kyle Bass, February 2013.

When I see a few (very few for that matter) financial pundits begin to question central banking policies in the mainstream financial news, I immediately think the day of reckoning has arrived. As Kyle Bass pointed out in the interview nearly two years ago (posted Monday), it all takes time. Although once it collapses it will likely happen very quickly, the process of changing the faith of the masses requires enormous energy and undeniable proof. Our world’s faith in central banking seems to be our only play — and hope — these days to save the world economy. Everything rides on the faith that our central bankers really do know what they are doing.

History has given us prime examples of what happens when a nation of people lose confidence in their currencies as a result of their government policies. The Weimar Republic and, more recently, Zimbabwe and Argentina, are a few such examples. I am not suggesting these examples are our destiny and would sincerely hope they are not, but currencies will undoubtedly be affected when confidence in central banking is lost. The difference this time is that it is not just one nation implementing this unprecedented experiment with monetary policy, it is every central bank in the world. So this is significantly different than anything we have done to ourselves in history. Zimbabwe and Argentina have just out-monetized the rest of us. But neither are leading economies like Japan. The size of Japan’s economy and the size of their “accommodative” monetary policy make them the nation to watch. Do you realize that the Weimar stock market reached over 26,000,000 in 1922, when just four years earlier it was at 126? What a return — except that it puts the above quote in perspective.

Don’t get me wrong, the best scenario is that the faith most have put into our central bankers proves to be correct, and that they are capable of fine-tuning all the dials to ease us back into a normal economy. By the way, is there anyone out there who remembers what normal actually looks like?

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