Howard Davies points to an important problem facing the world – the power of central bankers. They have become way too powerful and important for not just their own good but everybody else’s as well:
Archive for the ‘Central Banks / Monetary Policy’ Category
This one is by Norges Bank Deputy Governor Jon Nicolaisen. As he is a central banker, what more to expect than whether one should intervene ot let markets work during a crisis:
Those who think shadow money/banking is a new idea and came to the fore only in 2008 crisis, should know better.
Similar concerns arose when banks started offering deposits and one was not sure whether they should be counted as money or not. Over a period of time, deposits are not just counted as money but has become the most dominant form of money as well. So will repos the new shadow banking instrument make the similar transition as well?
This blog pointed to this post linking Harry Porter to economics. It said Ministry of Magic was just antithetical to economic world where market exchange should allocate resources not some bureaucracy .
In a rebuttal on Mises Blog it says Potter world was not all that bad. It has some useful lessons for central bankers:
There were flurry of articles towards end of India’s financial year on this murky term – currency in circulation. All these articles (article one , two and three)were looking at possible reasons for sharp rise of currency in circulation.
The question is why should anyone care? Well, one sees this circulation rising in times of high inflation as people need more money to settle transactions. But with declining inflation, one should not see a rise in the currency numbers.
First what is this Currency in circulation? This is basically all the paper notes we carry in our pockets. This along with rupee coins and small coins with RBI form currency in circulation. Rupee coins and small coins in the balance sheet of the Reserve Bank of India include ten-rupee coins issued since October 1969, two rupee-coins issued since November 1982 and five rupee coins issued since November 1985.
Next, what is the problem? See this table:
I did read this news last week but forgot to blog about it. Bloomberg edit team uses the case as a warning to all central bankers who can know more ignore cyber threats at their end. So far hackers were limited to banks but now have moved to central banks as well. Willie Sulton, the bank robber was once asked why he robbed a bank? TO which his answer was “that is where the money is”. Likewise, why just stop at a bank. Get to the creator of money which is the central bank.
What was this Bangladesh story? Few people managed to hack their system and get funds transferred to remote accounts elsewhere. It is just an amazing case of heist in digital space. As this blog keeps mentioning, banking is increasingly becoming a sub-sector of information technology. A bank is no more just about loans and deposits but equally about encryption and softwares. Soon, latter will take over former in terms of importance given how systems are getting integrated. This blog will not be surprised if we go onto see technology people heading and managing a bank.
This is a good and rare time to be a history buff. Most central banks are digging deeper and deeper into its history as present is so messed up.
So there was an exhibition at the Bank of England Museum which sheds light on different aspects of the organisation’s history through photographs.
The kind of attention Federal Reserve gets worldwide one would imagine that this is one institution which must be having broad approval from US people and polity. Ironically, it is actually just the opposite.
Unlike most parts of the world where discussion on central banks is just about their rate moves, in US one finds equal number of discussions on origins and relevance of Fed. This has gained steam after the crisis and lots of stuff is being written looking at historical basis of Fed.
This paper by Sian L. Seldin is quite a surprising one.
One would imagine it would explain how various Fed’s stats publications have changed overtime. This it does but keeps explanation to a minimum. All it does is list the various publications overtime. In the end there are appendices which stitch the story together.
The Board of Governors of the Federal Reserve System has published extensive statistical information on the U.S. economy and banking industry since 1914. This information has been published in various formats, usually referred to as “statistical releases.” Titles and release numbers of the publications have changed frequently. Federal Reserve Board Statistical Releases: a Publications History describes these changes; it is a convenient tool that lightens the burden of tracing the titles and release numbers by providing history in a single location.
A paper with no references whatsoever..
This is an interesting article which helps you think differently on role of money and banking in a society. Both money and banks are seen as wealth creators and we want more and more of both. However, this is not how both began to emerge. The idea for money and banks was to help communities and foster local commerce.
Interestingly, we are seeing some experiments which take us to the original roles of money and banks:
Dan Sanchez of Mises Institute has this scathing post on the topic. It is on US Treasury/Fed but applies to most economies across the world.
Actually keeping all insights from Austrian school away from teaching, we all succumb to the noise around central bank independence. We don’t even question what is this independence when both the Treasury and central banks are part of the same setup. The independence bit looks like just a cover up act so that people don’t question the overall monetary operations which move from one govt dept to another seamlessly…
It is one thing to reform the Fed, completely another to see Trump first getting elected as President and then reforming the Fed.
Things have become so negative for Federal Reserve (and ECB and BoE and BoJ and SNB and..??) that it has become a punching bag of sorts. Ryan McMaken of Mises has this bit on whether Trump will reform the Fed or not. Even more interesting is that all President candidates have spoken about reforming the Fed. From an institution which was beyond reproach some years ago, Fed has become such a reproachable organisation:
One very wise (and largely forgotten) former central banker once remarked that when a central bank makes record profits when others are struggling, it is signs of serious concern. As most of this free income is passed onto the govt, it raises questions over independence and all that..
David Howden of Mises writes on similar thing happening with Federal Reserve: