STAFF NEWS & ANALYSIS
More Central Bank Communication Is As Ridiculous and Dangerous as Less
By Daily Bell Staff - October 07, 2016

Via Daily Bell Staff  

 If there’s a golden rule for central bankers in the 21st century, this is it: Seek clarity and avoid uncertainty. A central bank’s target should be clear. The data it uses should be known. The analysis it conducts on that data should be comprehensible. And, certainly, politics should have nothing to do with its decisions. Yet across the world, central bankers are struggling to live up to these requirements. Instead they’re undercutting their own positions by introducing quite unnecessary confusion into policymaking. – Bloomberg

We are told in this Bloomberg editorial that central bankers must be clear about their goals and objectives so markets will not be “confused.”

It sounds like this is a reasonable objective. But actually, for decades central bankers were not supposed to communicate at all. This was the approach pioneered by Montagu Norman of the Bank of England: “Never explain, never excuse.”

Here from Eustace Mullins’ “Secrets of the Federal Reserve”:

The New York Times … Oct. 17, 1928, describes the conference between the directors of the three great central banks in Europe in July, 1927, “Mr. Norman, Bank of England, Strong of the New York Federal Reserve Bank, and Dr. Hjalmar Schacht of the Reichsbank, their meeting referred to at the time as a meeting of ‘the world’s most exclusive club’. No public reports were ever made of the foreign conferences, which were wholly informal, but which covered many important questions of gold movements, the stability of world trade, and world economy.”

The meetings at which the future of the world’s economy are decided are always reported as being “wholly informal”, off the record, no reports made to the public, and on the rare occasions when outraged Congressmen summon these mystery figures to testify about their activities they merely trace the outline of steps taken, and develop no information about what was really said or decided.

At the Senate Hearings on the Federal Reserve System in 1931, H. Parker Willis, one of the authors and First Secretary of the Federal Reserve Board from 1914 until 1920, pointedly asked Governor George Harrison, Strong’s successor as Governor of the Federal Reserve Bank of New York:

“What is the relationship between the Federal Reserve Bank of New York and the money committee of the Stock Exchange?”

“There is no relationship,” Governor Harrison replied.

Of course Harrison was lying. In fact, the secrecy was meant to keep central banking out of the news as it was controversial then as now. Additionally, the central bankers of the day were concerned that some of their pronouncements would turn out to be wrong of ill-conceived, and this would diminish their credibility.

As can be seen from this Bloomberg editorial, the ideas regarding Fed communication have come full circle. Now the idea is to communicate clearly and rigorously – regarding ways central banks can create and maintain a “normal” monetary environment with “normal” (higher) interest rates.

There are two issues with this emphasis on communication. First, the initial instinct of Montagu and others may have been more correct than not … from their perspective, anyway. With more communication in the modern era comes more controversy. Justifying central bank decisions is impossible because it is a form of price-fixing and because every pronouncement only reminds people that their monetary universe is run by a handful of unelected (mostly academic) bureaucrats.

Second, providing a full spectrum of available information only reinforces central banks’ role as the primary mover of the larger monetary system. The more amplified central bank pronouncements become, the less many investors and others will pay attention to additional non-central bank factors.

For instance, the Bank of Japan owns a tremendous amount of domestic equity. Given its dominant position, every communication from the Bank of Japan becomes a significant, even urgent pronouncement.

These are the issues involved in “more communication”: First, it actually creates controversy because central bank dictates are invariably incorrect over time. Second, it encourages group-think and concerted market movements because central banks are so powerful, especially in the modern era.

In fact, the reinforcement of this illegitimate banking monopoly and the raising of its profile are part of a deeper itinerary that intends to accomplish exactly the opposite of what is stated.

The intention, in fact, is NOT to stabilize markets. If one wanted to create a titanic, worldwide catastrophe, one would create just the kind of system we’ve got. It would consist of a series of monopoly controllers that would shove monetary policy in specific directions. In this way, one could haul markets higher and  higher, so high in fact that a crash of monumental proportions was virtually guaranteed.

The editorial argues that if central bankers were to more fully justify their decisions, they would be impelled to raise interest rates to create more “normal economies.” But this argument assumes central banking is supposed to be a stabilizing force. But that was never the intention of its founders.

Central banks were supposed to give the impression that they were given monopoly banking powers to do economic good. But the Federal Reserve for instance has debased the dollar during its existence until the currency is worth only two cents of what it once was.

It really doesn’t matter if central banking authorities communicate less or more. Central banks will never really tell the truth. Thus less communication will destabilize markets in secrecy and give insiders additional clear advantages. But more communication will only increase the impact that central banks have on their respective economies and expand the impact of the lying.

Conclusion: It’s not a question of less or more. The fundamental question is whether central banks should exist at all. They should not. They are price-fixing entities and their results always end in disasters, “soft” or “hard.” When THIS crash eventually comes, it will be so horrible that people will soon be convinced of the need  to start over. Of course the new starting point will be an increasingly global one, a more cohesive “world order” – as suggested by those individuals bringing us the current catastrophe. But that’s the real agenda.

 

 

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  • Praetor

    When fractional centralization does not work, lets get rid of it. Then we can have one whole centralized institution. No more need for all these little pesky dysfunctioning units. Great idea, No.

    Another wrong headed view from the global doomsday cult!!!

  • Doc

    @ DB, not sure why you keep referring to price fixing? They don’t fix prices, so do they fix interest rates? No they don’t. The central banks keeps moving the interest rates up and down with huge negative impact on the existing capital. It would be less negative if they actually fixed interest rates at one level and tried to maintain it.

    You often run Fekete’s articles. One lesson from them is that the modern central banking theories have things backwards. They try to keep prices fixed by adjusting the interest rates, when the better way would be to keep interest rates stable by letting prices adjust.

    Of course, there’s no need for a central bank to accomplish that. And they aren’t here to do good to begin with…

    • sadstate

      @Doc To quote your comment, “The central banks keeps moving the interest rates up and down “.
      By definition that is price fixing. If words have meaning this is a price fix.

      • Doc

        I’m not here to pick a fight, as I’m a big fan of yours. But I must disagree.

        You might be right, assuming that the rate of interest is a price, which I’m not sure it is. I think a price is a sum of money you pay for a good or a service. Interest is a sum of money you pay (x) for a loan of some kind (y). The rate of interest is x/y. Not sure why a rate would be the same as a price.

        But even so, adjusting the level of this ‘price’ on a seven week basis is hardly the meaning of ‘fixed’. See https://fred.stlouisfed.org/series/FEDFUNDS for the Federal funds rate moving around. It’s not even one uniform rate. They are adjusting the rate more often than a normal business adjusts its prices. The variation is perhaps also greater than prices normal. Moreover, a negative interest rate, like we now have in my country of birth, would in that case be a negative price. Not sure what means too.

        The main problems as I see it is that they have monopolized money and are manipulating the interest rates, while claiming they are trying to maintain a fixed price level. Bad economics is used to fool people that they are the good guys.

  • Don Duncan

    Or, to put it bluntly, honestly, TPTB are quite aware they have a balancing act to perform if they want to continue transferring wealth form us to them. Theft destroys wealth, more wealth than is stolen, but if enough wealth is left, wealth production continues, which allows the theft to continue. How much can they steal before they kill their host? They (TPTB) probably think they know, or can make adjustments as they go, keeping the whole scam going. And they probably think that every near total collapse is a learning experience, one which will allow them to keep ahead of the curve. They probably think their worst enemy is the truth, transparency. That they have right. They fear their victims will be woken up and realize they are being scammed. But that is not their main problem. That would only address their most potent control mechanism, the money monopoly. It would not get to the root of the problem: the myth of benevolent rulers, so called leader/protectors. As long as that myth continues, TPTB can devise a new scam. Jefferson/Jackson destroyed the central bank, but not the foundation on which it rested, the institutionalized violence. As long as that exists, no one outside TPTB exclusive club is safe. Therefore, this is where our focus should be, on the superstition that makes individual sovereignty impossible, or at least extremely difficult if forced on us by the majority. The tipping point of 10% enlightenment must be reached to kill the irrational worship of the state.

    • Bruce C.

      I understand your sentiment that the root problem is the belief in “benevolent” rulers but that is a very tough sell and one that I submit would have (and does) all kinds of unintended consequences because that implies that human beings are inherently evil or untrustworthy, etc. That’s not a good belief for most people to have because it would poison their own personal lives too. Besides that, people already believe that en masse which – ironically – is why they want to believe in benevolent (read: “exceptional”) people/rulers.

      I think the better approach is for people to realize that centralized control of economic and political matters are not humanly possible and thus should not be expected. For example, no one thinks that the conscious mind should run the “involuntary” processes of the body because it is far too complex and could not react in real-time as it must. One could make the analogy that the global political and economic system is just as complex and thus not suited for centralized conscious control.

      My argument side-steps the “humans are evil” argument and replaces it with “humans are unsuited for that much control,” which is an important difference. Empirical/historical evidence bears that out. Central banking – no matter what its official or actual intentions are – has not succeeded as far as the rest of us are concerned and on that basis alone should be disbanded.

      The main challenge to my argument fundamentally is the willingness for people to trust themselves. By extension, it is the trust in the “free market.”

      • Don Duncan

        I agree with your conclusion. I don’t know how many decades or centuries it will take for everyone to become fully self sufficient, independent thinkers but we don’t have to wait for that to be living in a capitalist, individualist, voluntaryist society. Why? Because the same zombie-like conformist mentality that gives us collectivism and state worship can be turned around to believe in a voluntaryist society. It will only take about 10% to turn the tide. The rest will follow, not fully understanding, not able to fully defend their beliefs, but at least they will not be bent on self-enslavement. In time, little by little the full enlightenment will come to all.
        There is no substitute for knowing (groking?) and knowing how & why you know. It’s truly empowering, satisfying, and gives an inner comfort.

  • Marco Saba

    Maybe people should remember that the Federal Reserve was aimed at destroying the US Treasury: http://leconomistamascherato.blogspot.it/2016/10/1910-bankers-conspiracy-to-destroy-us.html

  • roc balie

    Today risk of earthquake and other natural disaster seems to me a little bit derisory with regard to the war risks!

    http://www.voltairenet.org/

    https://strategika51.com/

  • Rastindian/FatShiva

    Great read..
    More or less, in my personal opinion we have to make peace,accept and deal with their existence.
    Keeping pace with the changes in and around the imf and worlds leading central banks is one way to do it.

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