The Jackson Hole speeches of Janet Yellen and Mario Draghi last week were notable for the omission of any comment about the burning issues of the day:
…where do the Fed and the ECB respectively think America and the Eurozone are in the central bank induced credit cycle, and therefore, what are the Fed and the ECB going to do with interest rates? And why is it still appropriate for the ECB to be injecting raw money into the Eurozone banks to the tune of $60bn per month, if the great financial crisis is over?i
Instead, they stuck firmly to their topics, the Jackson Hole theme for 2017 being Fostering a dynamic global economy. Both central bankers told us how good they have been at controlling events since the last financial crisis. Ms Yellen majored on regulation, bolstering her earlier-expressed belief that financial crises are now unlikely to happen again, because American banks are properly regulated and capitalised.
Incidentally, more regulation hampers economic dynamism, contra to the subject under discussion, and confirms Ms Yellen has little understanding of free markets. Mario Draghi, however, told us of the benefits of financial regulation and globalisation, and how that fostered a dynamic global economy. But a cynic reading between the lines would argue that Mr Draghi’s speech confirms the ECB is in thrall to Brussels and big business, and is merely representing their interests. And he couldn’t resist the temptation to have a poke at President Trump by expressing the benefits of free trade.
Hold on a moment, free trade? Does Mr Draghi really understand the benefits of free trade?
That’s what he said, but his speech was all about the importance of regulating everything Eurozone citizens can or cannot do. It is permitted free trade in a state-regulated environment. It is a version of free trade according to the EU rule book, agreed with big European business, which advises Brussels, which then sets the regulations. It is a latter-day Comintern that allows you to trade freely only on terms set by the state for prescribed goods with other states of a similar disposition. Draghi’s speech was essentially justifying the status quo laced with Keynesian-based central bank dogma.