ML-Implode News - The Fed and other central banks have lost their magic powers

``Markets do not believe that NIRP will create the borrowing-driven consumption and investment that generates economic activity. Existing high-debt levels, poor employment prospects, low rates of wage growth, and overcapacity have lowered potential growth rates, sometimes substantially. NIRP is unlikely to create inflation for the same reasons, despite the stubborn belief among economic clergy that increasing money supply can and will ultimately always create large changes in price levels.
There are toxic by-products to this policy. Low- and negative rates threaten the ability of insurance companies and pension funds to meet contracted retirement payments. Bank profitability also has been adversely affected. Potential erosion of deposits may reduce banks' ability to lend and also reduce the stability of funding.
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Policymakers are unable to defend their actions. They rely on contra-factual arguments, asserting that their policies are successful because in their absence things would have been worse. What is clear is that the loss of faith in central banks poses a significant threat to the stability of the global economy and markets.

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The Fed and other central banks have lost their magic powers - Das