Global markets today seem irresistible to central bankers with plans for better times. Planning is the central bankers’ baleful vanity, since, for them, markets are a test tube in which to try out their interventionist theories.
Central bankers control the price of money and therefore indirectly influence every market in the world. Given this immense power, the ideal central banker would be humble, cautious, and deferential to market signals. Instead, modern central bankers are both bold and arrogant in their efforts to bend markets to their will. Top-down central planning, dictating resource allocation and industrial output based on supposedly superior knowledge of needs and wants, is an impulse that has infected political players throughout history. It is both ironic and tragic that Western central banks have embraced central planning with gusto in the early twenty-first century, not long after the Soviet Union and Communist China abandoned it in the late twentieth. The Soviet Union and Communist China engaged in extreme central planning over the world’s two largest countries and one-third of the earth’s population for more than one hundred years combined. The result was a conspicuous and dismal failure. Today’s central planners, especially the Federal Reserve, will encounter the same failure in time. The open issues are, when and at what cost to society?
The impulse toward central planning often springs from the perceived need to solve a problem with a top-down solution. For Russian Communists in 1917, it was the problem of the czar and a feudal society. For Chinese Communists in 1949, it was local corruption and foreign imperialism. For the central planners at central banks today, the problem is deflation and low nominal growth. The problems are real, but the top-down solutions are illusory, the product of hubris and false ideologies.
The Death of Money: The Coming Collapse of the International Monetary System
[See also Book Review: ‘The Death of Money’ by James Rickards which concludes with:
Rickards book is packed with cutting edge analysis and rational perspectives on pretty much every topic the world citizen has to know about. As of this moment, there is no other book offering explanations and solutions to the most pressing problems the world is facing, making “The Death of Money” an absolute must read.
I’m only about 25% into the book and find it fascinating. I found the market intelligence and financial war sections particularly interesting. Rickards and others worked with the CIA to design and implement a system which could have predicted the 9/11 attack a few days before it happened based on the shorting of airline stocks by people in the social networks of the hijackers. It also has other uses related to insider trading.
“An absolute must read”? I probably wouldn’t go that far, at least not based on what I have read so far. But it’s highly recommended.—Joe]