Now here’s a big vote of confidence for all those smart economists with PhDs who are now now running the world’s central banks – not one, but two, stories in the mainstream financial media today questioning whether they know what they’re doing.
First, from the Financial Times comes this story in which we learn that, central bankers themselves say they’re flying blind.
Central Bankers Say They Are Flying Blind
Growing concern at the International Monetary Fund over the long-term side-effects of interest rates close to zero came as some of the leading figures in central banking conceded they were flying blind when steering their economies.
Lorenzo Bini Smaghi, the former member of the European Central Bank’s executive board, captured the mood at the IMF’s spring meeting, saying: “We don’t fully understand what is happening in advanced economies.”
In what is equally refreshing and disturbing, they admit to not knowing what they were doing before the financial crisis as well as during and after it, that is, assuming it’s over (which it probably isn’t).
In this lengthier Reuters report, central banker are seen as superheroes without a script.
Central bankers cast as superheroes with no script
“The danger that we drown in money is small compared to the danger that we slide deeper into crisis and that it gets harder to get out,” said Marcel Fratzscher, former head of research at the ECB and now head of Germany’s DIW economic institute.
But nowhere is unease about expanding the role of central banks greater than in Germany, home to the fiercely independent Bundesbank.
Germans worry that relying on central banks minting cash creates a dangerous illusion that there are pain-free fixes to largely political, social or demographic problems.
I guess that’s the message here – everyone seems to want solutions that are pain-free and the world’s central banks are about the only ones that seem capable of providing that.