The Hubris Of Central Bankers

Central bankers have assumed control of every major western economy.  Their decisions move markets, paper over bailouts, fund government deficits, buy time.  In effect they are the legislature and presidency of most western democracies.   In fairness, central bankers have had this thrust upon them by several years of political failure … executive malfuctions and failed leadership; the regulatory incompetence, political cowardice and ideological gridlock of the US Congress, of virtually all of the Parliaments of the European nations, and most pitifully of that toothless supra-national joke, the EU Parliament in Brussels.

One can reasonably credit central bankers for decisive action while legislatures mumbled and fumbled, and Prime Ministers and Presidents were exposed as empty suits and buffoons, running from one “important meeting” to another, spouting empty campaign slogans and posing for the cameras.  But action is not wisdom.

This article below is in its way quiet, intense, and crystal clear.  It is long (fair warning if you have an MTV attention span) and worth every moment you spend with it.  It’s one of those essays that brings out the jealousy in me; I wish I’d written this.

The wisdom missing in the world these days (days in which the fiscal bankruptcy and political failure of the beneficial welfare state is the prime problem) and missing especially in the central bankers guild, can be found here. 

The Rime of the Central Banker


by John Butler
Chief Investment Officer at Amphora; Atom Capital
London, UK

Central bankers continue to pour monetary petrol on the raging fires of insolvency. As a result, central bank balance sheets across the developed world continue to expand in size and deteriorate in quality. The US Fed claims that its policies will support asset prices, yet without contributing to rising consumer prices. As such, they are claiming that they can create a set of conditions similar to, say, 1996-99 or 2003-06, when stock markets rose strongly yet consumer price inflation was relatively subdued. Unfortunately, each of those episodes was followed by a stock market crash and economic recession. Are central bank policies invariably so hubristic, short-termist and reckless? In this regard, it is instructive to consider the lessons of one of the greatest of all English poems, Samuel Taylor Cooleridge’s Rime of the Ancient Mariner. Also instructive is to look at the greatest low-inflation boom-to-bust period of modern times: 1927-1933.

Read the rest of the article here.


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