The first round of interventions (2007-early 2009) was performed in the name of saving the system. The second round (2010-2012) was done because it was generally believed that the first round hadn’t completed the task of getting the world back to recovery.
However, from 2012 onward, everything changed. At that point the Central Banks went “all in” on the Keynesian lunacy that they’d been employing since 2008. We no longer had QE plans with definitive deadlines. Instead phrases like “open-ended” and doing “whatever it takes” began to emanate from Central Bankers’ mouths.
However, the insanity was in fact greater than this. It is one thing to bluff your way through the weakest recovery in 80+ years with empty promises; but it’s another thing entirely to roll the dice on your entire country’s solvency just to see what happens.
In 2013, the Bank of Japan launched a single QE program equal to 25% of Japan’s GDP. This was unheard of in the history of the world. Never before had a country spent so much money relative to its size so rapidly… and with so little results: a few quarters of increased economic growth while household spending collapsed and misery rose alongside inflation.
This was the “Rubicon” moment: the instant at which Central Banks gave up pretending that their actions or policies were aimed at anything resembling public good or stability. It was now about forcing reality to match Central Bankers’ theories and forecasts. If reality didn’t react as intended, it wasn’t because the theories were misguided… it was because Central Bankers simply hadn’t left the paperweight on the “print” button long enough.
This process is now accelerating in Europe where a country that comprises less than 2% of the EU’s total GDP (Greece) has managed to be FIVE-YEAR problem that cannot be resolved through more debt or money printing.
The ECB and EU have tried everything to kick the Greek “can” down the road. History has shown us time and again that Central Banks first attempt to deal with a debt problem by printing money… but eventually the debt default/haircut has to occur.
This process has now begun in Greece. The fact the markets are imploding should give you an idea of how fragile the system is. One can only imagine what will happen when a larger player such as Spain or France or even Japan goes belly up.
The Big Crisis, the one in which entire countries go bust, has begun. It will not unfold in a matter of weeks; these sorts of things take months to complete. But it has begun.
Full article: Greece is Just the First of MANY Countries That Will Be Going Belly-Up (Zero Hedge)