Theory of Central Banking Rapidly Falling Apart

Currencies / Central Banks
May 14, 2010 - 11:53 AM

By: Mike_Shedlock

Central banks are about to learn the global economy is not Alice's Restaurant. http://www.arlo.net/resources/lyrics/alices.shtml

In case you don't know the tune, here is the crucial line: "You can get anything you want at Alice's Restaurant"

Anything you want, seems to be the attitude of central banks. The problem is, it is virtually impossible for every central bank to get what it wants at the same time, when they all want the same thing, cheaper currency relative to each other to stimulate jobs and exports.

Here are a few examples to help explain what I mean.

UK at Mercy of Demand in EU

Please consider U.K. Trade Deficit Widened in March on Import Jump http://www.bloomberg.com/apps/news?pid= ... mUMTwqQr68

The U.K. trade deficit widened in March as imports jumped the most in six months, led by demand for goods from cars to engineering equipment.

The Bank of England is counting on a weak pound to boost exports and support economic growth it helped manufacturing jump the most since 2002 last month. The sovereign debt crisis in Europe has darkened the outlook for U.K. exporters at a time when domestic demand may come under pressure from measures to tackle the public finances.

“With a fiscal squeeze looming, and set to have knock-on effects on consumer incomes, we think that the onus is still on the external sector to keep the recovery going,â€