Loading ...On Monday, I suggested central banks would resort to buying stocks to prop up the stock market: Will the Fed Let the Stock Market Crash Before an Election? Reports suggest central banks and states are already buyers of equities, either via proxies or via public pension funds that have increased their ownership of equities.
Central banks have reached a fork in the road. The policies have the past six years– jawboning, i.e. talking up the power of the central banks, buying bonds and shoving new money into the financial sector–have reached diminishing returns. The public’s once unbounded faith in the efficacy and power of these policies is waning, and now central banks face open skepticism.
One path is to admit the limits of central bank powers. This is tough to do when you’ve been glorified for so long, but the honest confession of the limits of making short-term buffers into permanent policies would force governments to deal with the issues that have been avoided for the entire six years of central bank free money.
The second path is to start buying assets en masse. With jawboning and easing both discredited, there really is nothing else the central banks can do to support asset prices and keep the thin veneer of a healthy economy from peeling off.
The third choice–continue jawboning and launching yet another failed easing program–will only further discredit central banks and their policies.
http://www.zerohedge.com/news/2014-10-15/what-options-are-left-central-banks