“She Has A Flair For Darkness” – Meet The Woman Tasked With Predicting How The Fed Will Blow Up The World
Central bankers have two key roles: the first, and more trivial one, is to set the price of money by adjusting short-term interest rates, something they have been doing since the advent of central banking; the second and far more important role (especially in recent asset bubble-bust history) is to preserve the public’s confidence in a financial system that is effectively a ponzi scheme, reliant on both the constant creation of money in the form of new debt and society’s willingness to spend and not save said money, by propping up asset prices or vowing to do everything in their power to avoid another Lehman-type financial catastrophe. Here one need only recall the immortal warning of Mario Draghi to support the artificial European currency at its moments of greatest despair, “whatever it takes.”
It is this second key role that also has forced central bankers to attain an aura of infallibility: after all, if central bankers admit they don’t know what they are doing, how can they convince others that “all shall be well.” Here, too, one can recall Mario Draghi’s vows – which we now know were lies – that the ECB “does not have a Plan B” in case Greece exits the Eurozone, as the mere contemplation of such a worst-case scenario would create the self-fulfilling reality that central bankers are trying to avoid. Another such example is Ben Bernanke’s iconic prediction from 2007 that “subprime is contained.” Everyone remembers what happened next.
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