"Opaque answers to straightforward questions were part of the job, because I couldn't say 'no comment' and I didn't want markets to overreact... What tends to happen is your syntax collapses. All of a sudden, you are mumbling. It often works. I created a new language which we now call Fedspeak. Unless you are expert at it, you can't tell that I didn't say anything."
These words, reminiscent of something directly out of Orwell's 1984 nightmare, were spoken recently by Alan Greenspan, the ex-chair of the Federal Reserve, the American equivalent of the Bank of England. It's easy to get the impression that dear old Alan hadn't got a clue what he was talking about. Indeed, he seems to suggest that his intention was to confuse and baffle pretty much everyone, including himself, to avoid letting on that the pre-2008 credit boom was built on quicksand.
Why should this matter? Because Alan Greenspan was the most powerful man in the world until Ben Bernanke took over in 2006. Mr Bernanke and his counterparts in London, Frankfurt and Tokyo now control the global economy, or think they can.
This might seem like hyperbole. However the evidence is visible for all to see. The markets now only go up and down when a central banker speaks.
When Mr Draghi says he will do anything to stop Greece or Portugal leaving the eurozone, the markets go up and the euro strengthens. When he criticises the slow pace of the Greek or Portuguese governments' suicidal 'austerity programme', their governments' borrowing costs soar and the markets wobble. It is simple blackmail. Do Draghi's bidding or you will default and trigger economic Armageddon.
In the US, Ben Bernanke's whisperings can ignite the markets like a match near a petrol pump. When he suggested the Federal Reserve would slow down its money printing activities, the markets went into tailspin, the US government's debt costs spiked and investors across the globe panicked. It was only when he clarified his mumblings that everyone calmed down a bit.
This week, the deputy governor of the Australian central bank made a joke about how his colleagues sat around chatting for a long time about how much to increase interest rates. As a consequence, the Australian dollar collapsed until the person who had made the joke apologised the next day.
This small group of men (only Russia has a female central bank governor) decides how much the money in our pockets is worth. They decide whether governments survive or collapse. They decide how much a family will pay back in mortgage repayments each month and whether a business will go bust or not. The health of the global economy is reliant on the 'opaque answers' and the 'mumbling' of about a dozen or so individuals.
This is relevant to the UK right now because Mark Carney has just taken over from Mervyn King at the Bank of England. Coverage has been almost unanimously flattering, describing him as a "rock star" central banker, as a George Clooney type figure, as the saviour of the British economy. Indeed, a Huffpost blogger said on Thursday,
"...I hope Carney's good run does continue, but I fear instead that this initial flurry of good news will simply allow him to get his feet under the table before he is called forward to stabilise the UK economy with some more decisive action."
This comment was made in reference to the fact that various bits of economic data published this week were positive. What's remarkable is that a) this good news is trusted and that b) it was being attributed to Carney before he had even started work. The double dip recession was edited out of the economic history books recently because of 'incorrect statistics', so why believe these ones?
And where does the faith in central bankers come from? Why is everyone OK with the fact that, in much of the world, economic policy has been de facto outsourced by democratically elected governments to a bunch of unelected bureaucrats?
They are uniquely qualified, so it is said, to be able to predict the future and manage vast and complex economies. They are experts, apparently, who have often spent decades working in private financial institutions like Goldman Sachs or writing papers on now-rubbished economic theory in the libraries of LSE or Harvard. Why then are we still in recession, half a decade after the crisis began?
A few details about who now controls the British economy, given that Osborne has pretty much given up. Mark Carney worked for Goldman Sachs for 13 years. He was advising the Russian government on how to avoid going bankrupt when Goldman Sachs was betting that this would happen. The notion that he has somehow shed all Goldman-style thinking when he moved into his role in the Canadian Finance Ministry is ludicrous.
He is credited with preventing an economic meltdown in Canada. Actually this was not simply thanks to him keeping the Canadian economy drunk on low interest rates, but more to do with the fact that Canadian banks had not been allowed to become too big too fail. Canada did well precisely because its banks were tamed in the late 1990s, while in the UK and USA let their banks turn into glorified casinos. Carney did not personally save Canada from economic ruin. He is in fact a creature of the establishment that brought the British and American financial systems down.
To return to the initial quote by Alan Greenspan, which indicates that he didn't know what was going on or how to fix the mess he was in part responsible for. If Greenspan was confused, why on earth do people think that Carney will be any different?
It seems slightly absurd to claim that Carney, Bernanke, Draghi and a few others can pre-empt the economic behaviour of almost seven billion individuals, but this is what they are apparently able to do. It is argued that only central bankers can save us from permanent economic stagnation. This is despite the fact (yes, the fact) that so many of them worked for the banks that destroyed our economies in the first place. Who, exactly, is in control right now?
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