In his recent posting on Linked In, entitled, ‘The death of macro-prudential’, Stuart Trow of the EBRD delivered a well-aimed broadside at the pitiable conduct of the Bank of England and elaborated on some of the malign consequences of its catalogue of errors. Without wishing to single him out unduly for criticism for a piece with whose broad outlines I concur, I see it as a prime example of where even those who are not wholly in thrall to the cult of ‘Whatever it Takes’ often miss the critical features of that cult’s essential evil. Left unaddressed, therefore, I fear this lack can only leave the intellectual soil fertile for a continued harvest of malign outcomes on the part of our clay-footed idols in the central banks.
Where better to start than with the following bold assertion of the author, viz., that ‘…if only policymakers had been allowed to exercise their judgement, crises could have been anticipated and avoided…’?
In my eyes, that heroic presumption of policymakers’ qualities of ‘judgement’ almost vitiates the argument from the off. Irrespective of whether one can be persuaded that Mario Draghi, Jerome Powell, Divus Marcus Carney and the like are the most intelligent, most far-sighted – most impartially Olympian – beings on the planet, the reality is that neither their fervid number-crunching of rows of abstracted, statistical time-series nor the GIGO output of their horribly over-specified macroeconomic ‘models’ can possibly substitute for the particular judgement and uniquely individual preferences of untold millions of men and women interacting, every minute of every day, every where in the market.
No, the best the central bankers can hope to achieve – in finest Hippocratic fashion – is that their own meddling does not send too any wrong signals, conjure up too many wrong incentives, or encourage too many, ultimately self-defeating behaviours among the innocent millions over whom they have been almost divinely-appointed to hold sway and over whom they hold seemingly limitless power.
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