“Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. ‘One of my favourite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart ?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve chairman of the twentieth century.” To which you replied, “But is he smart like us ?”
- Satyajit Das.
“..Every time a report lands on their desks, central bankers must stop to think about the economic, social and political havoc their policies have caused over the past 10 years.
“The desperate attempt to avoid deflation via quantitative easing and record-low interest rates has had horrible side effects, and this observation is hardly controversial. The rich have become much richer; corporate wealth has become more concentrated; soaring house prices have created intergenerational strife; low yields have made all but the super-rich paranoid that they will be entirely unable to finance their futures. Most markets have ended up overvalued (this will really matter one day), while pension fund deficits and a constant sense of crisis have discouraged capital investment — and have possibly held down wages in the UK.
“Set a target, get a distortion. This is standard stuff. But the fact that extreme monetary policy has been going on for so long means that central bankers do not just have macro problems to feel bad about. They are also effectively responsible for the increasingly dodgy micro policies governments have felt forced to put in place in an attempt to alleviate the nasty side effects of very low interest rates, over which they have no control.”
- Merryn Somerset Webb, Billionaire boom is a sign that rates need to rise, Financial Times 28.10.17.
In his latest piece for the Financial Times (‘Central banks alone cannot deliver stable finance’ – may require subscription, but seriously, don’t bother), Martin Wolf issues his usual apology for the extraordinary recent activity of central bankers, including the radical policy triumvirate of QE, ZIRP and NIRP. His article ends,
Criticising the success of our central banks in reflating our crisis-hit economies, because this created today’s financial risks, is not a valid reaction to their actions. It is, however, an extremely valid criticism of finance. It is also a valid criticism of the failure of governments to address the many frailties that still lead to financial excess. The central banks did their job. Unfortunately, almost nobody else has done theirs.
As has come to be commonplace, almost everything Mr Wolf suggests is incorrect, outrageous, or both. But no sooner had his column appeared on the FT website than it was met with the following response by the blogger MarkGB. It is reprinted below in full, unedited, with the consent of the author.
To read the full article, Download For god's sake stop !