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Merryn Somerset Webb: How much damage have central bankers done? A lot
By Merryn Somerset Webb
Bloomberg News
Friday, December 22, 2023
What's Christmas without a fight about money, a lunch-table villain and a really good book? For those who haven't yet finished their present shopping I have some suggestions that will give you all three in one happy package.
First up, someone must have a copy of "You Always Hurt the One You Love: Central Bankers and the Murder of Capitalism" by Bernard Connolly.
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You might not need much more than the title to get your row going. But it's worth reading on to nail down exactly why central bankers are almost entirely responsible for asset bubbles "unsupported by realistic expectations of future productivity," along with recent financial crises and disruptive wealth inequality.
Their mistakes have been more obvious than usual in the last few years -- their failure to recognize that fast-rising money supply would, with the usual 12- to 18-month lag, lead to inflation looks increasingly bizarre to even non-experts, for example.
But for Connolly this is nothing but the icing on a huge cake of intellectual failure, one that has been on the go since the mid-1990s -- with Alan Greenspan as the foundational villain, the first to use low interest rates to pull economic activity forward and create an "intertemporal dislocation."
There is much in here on the failings of central banks in general -- negative real interest rates and the massive fiscal deficits they have forced are already having nasty consequences. But key to much of it has been their mission creep: It makes no sense, says Connolly, for the Fed "choose to reinterpret its mandate to take on sociopolitcal objectives -- inclusive, green, or whatever, admirable and necessary or not. To do so is "profoundly anti-democratic." (No one voted for central bankers to make these choices.
All this could, and probably will, end very badly -- although, if you make it to the final chapter you will find some glimmers of hope.
For more on how it's all central bankers' fault, follow Connolly with Edward Chancellor's excellent "The Price of Time," a history of interest rates. Distort the price of money, says Chancellor, and you distort the price of time, the present and the future move "out of whack." Overly low rates are in effect a type of "loan forbearance" that encourages investment and then traps capital in low- (or no-) return areas, something that has obvious effects on productivity.
The truth is that messing with the most important signal in markets, as our central bankers have, can lead only to productivity failure, economic insecurity, and in the end social and cultural division. It has taken us 25 years to get ourselves into this position, says Chancellor (he is with Connolly on the mid-1990s being the starting point of the monetary-policy madness), and it could take a similarly long time for higher interest rates to correct capital allocation (and wealth inequality) and get us out of it. ...
... For the remainder of the review:
https://www.bloomberg.com/opinion/articles/2023-12-22/how-much-damage-can-central-bankers-do-a-lot
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Toast to a free gold market
with great GATA-label wine
Wine carrying the label of the Gold Anti-Trust Action Committee, cases of which were awarded to three lucky donors in GATA's recent fundraising campaign, are now available for purchase by the case from Fay J Winery LLC in Texarkana, Texas. Each case has 12 bottles and the cost is $240, which includes shipping via Federal Express.
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GATA will receive a commission on each case of GATA-label wine sold. So if you like wine and buy it anyway, why not buy it in a way that supports our work to achieve free and transparent markets in the monetary metals?
To order a case of GATA-label wine, please e-mail Fay J Winery at bagman1236@aol.com.
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Support GATA by purchasing
Stuart Englert's "Rigged"
"Rigged" is a concise explanation of government's currency market rigging policy and extensively credits GATA's work exposing it. Ten percent of sales proceeds are contributed to GATA. Buy a copy for $14.99 through Amazon --
-- or for an additional $3 and a penny buy an autographed copy from Englert himself by contacting him at srenglert@comcast.net.
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