During the populist revolt of 2016, which first led to the "shocking outcomes" of Brexit and then Trump, we cautioned that these phenomena were merely the "silent majority" of the developed world's middle class expressing their anger and frustration with a world that has left them - and their real disposable income - behind, while rewarding the Top 1% through policies that have led to a relentless and record ascent in global asset prices, largely the purview of the world's wealthiest. More recently, we also noted that it was only a matter of time before this latest "revolt" fizzled, as the realization that changing one politician with another would achieve nothing, and anger shifted to the real catalyst behind growing global inequality (and anger): central banks.

In his latest note today, Albert Edwards picks up on this theme to write "Theft redux: the citizens will soon turn their rage towards Central Bankers." The core of his argument is familiar:

While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE. In an age of "radical uncertainty" how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.

That's just the beginning from Edwards, who appears to be getting increasingly angrier and more frustrated with a market that makes increasingly less sense: his fiery sermon continue with the following preview of the "inevitable catastrophe that lies ahead."

Evidence of the impact of monetary madness on assets prices is all around if we care to look. I read that a parking spot in Hong Kong was just sold for record HK$5.18 million ($664,200). What about the 3.5x oversubscribed 100 year Argentine government bond? Sure, everything has a market clearing price, even one of the most regular defaulters in history. But what concerned me most about the story was it was demand from investors ("reverse enquires") that prompted the issue. Is it just me or can I hear echoes of the mechanics of the CDO crisis? But no one cares when the party is still raging and investors, drunk with the liquor of loose money, are blind to the inevitable catastrophe that lies ahead. 

There is a lot of anger out on the streets, as demonstrated most visibly in recent elections. Even in France where investors feel comforted that a "moderate" has gained (absolute?) power, it is salutary to remember that the two establishment parties have just been decimated by a man who had never before stood for public office! This is perhaps even more radical than Trump's anti-establishment victory under the Republican umbrella. The global political situation is incredibly fluid and unpredictable. While a furious electorate has turned its pent up anger on the establishment political parties, the target for their rage is misguided. I am not completely alone in thinking it is the unelected and virtually unaccountable central bankers who are primarily responsible for the poverty of working people and who will be ultimately held to account in the next crisis.

In the immediate aftermath of the 2008 financial crisis, politicians skilfully diverted the publics' anger away from themselves by scapegoating "the bankers". After another eight years of economic stagnation that excuse no longer is tenable and politicians themselves are now taking the flak. But citizen revolutionaries will, I think, soon turn their fire on those who I believe are truly responsible for their plight. We explained back in January 2010 in a note entitled Theft! Were the US & UK central banks complicit in robbing the middle classes? how central banks in the US and UK had deliberately stocked up massive housing bubbles prior to the Global Financial Crisis (GFC) to disguise the rapid rise in income inequality in both countries. Rapidly rising house prices allowed the middle classes to maintain the illusion they were getting richer so that despite stagnant real incomes they could continue to consume by extracting housing equity. We know how that party ended!