Simple is good. Complicated can be fixed. Complexity kills.
These are the men who matter more than the politicians: Ben Bernanke of the US Federal Reserve, Mario Draghi of the European Central Bank, and Mark Carney, currently Governor of the Bank of England and formerly the Governor of the Bank of Canada.
These central bankers have taken effective control of the economy as well as the financial and political system. This is both unnatural and unsustainable. Unelected and unaccountable, they wield more power over the lives and fortunes of people than any cabal in history. Their machinations have either saved the Western world, or they have undermined it in a manner that not even the cynics cannot grasp. History will provide this answer – and maybe sooner than we think.
We are told that we must trust, for they are wise men who have studied in the hallowed halls of the great academies. They are our intellectual betters and they are morally superior – and as such we must listen, obey and follow.
They have stood on the docks of Amsterdam as the tulip bubble popped and they saw the heads role off French revolutionary guillotines as the assignant currency failed. They were there in 1866 when the Bank of England’s Governor stepped into the breach and they lived through the great depressions of the 1870s and the 1930s. To them, the Shadow Chancellor is not a modern day Labour Party politician but rather the man that gave us Bagehot’s dictum.
But I do not believe that they can integrate knowledge across boundaries – especially not the lofty walls that the academics have willingly built between politics and economy. And by placing economics on top of politics, they have perhaps unknowingly committed unnatural acts.
The bankers should serve the economy and the economy should serve the polity.
Instead, the polity is used as a source of revenue to serve the economy which is now controlled by the bankers. Natural market economics will not tolerate an unnatural inversion such as this forever.
I don’t have a PhD in economics from Harvard or Princeton. I am not a quant. I did work in the financial sector and I do understand a thing or two about risk.
But risk was learned in my early days flying as an air crewman in rotary wing search and rescue aircraft in the North Atlantic. Carrying a gun in a war zone provided some insights into threats, risk and risk management. On a single day’s travel in Bosnia alone there were as many as six different currencies required. (There was a lesson about politics, war and money in there somewhere!) Spending a couple of days in Exarchia was insightful as well!
What are the messages we need to send to the Central Bankers as we move into an uncertain economic and political future? These are the lessons I have learned from my betters whom I have had the honor to learn from, to follow and to lead:
1. Simple is good. Complicated can be fixed. Complexity kills.
2. No plan ever survives contact with reality or the enemy. Plan for that.
3. If all else fails, the shortest answer is correct.
4. Occam’s razor is good. Give folks a close shave with it now and again.
5. If you cannot explain your concept to an average kid in grade eight, you don’t understand it either.
6. It is all linked together: Politics. The Economy. War. Nothing stands in isolation and they move together.
And for the Central Bankers, this is the only economic and political rule that is always true:
7. That which cannot go on forever – won’t. (Long term low interest rates and money printing/QE)
Politics is ever the master science and economics will remain the dismal one if left in the hands of only economists. At the end of the day, debased fiat currencies will dissolve. But power and politics will remain. All those economic models the Central Bankers learned at Princeton and Harvard failed dismally in 2000 and they failed again in 2008. But their so-called risk managers still do not see the train coming straight at them. When will the Central Bankers change their models so they can integrate knowledge across boundaries?
Central Bankers and the Future Revolution
These men are students of the economy and finance. They actually believe that there is a science called economics and they believe (hope?) that by changing an input variable they can control outcomes. But economics is not a closed environment and politics will forever change the value of the incoming variables.
They are not, alas students of politics, so we shall all suffer.
Ultimately though, despite the power of the bankers, it is the politicians who are at fault. Due to their idleness, corruption and dimness, they have handed their powers and responsibilities over to the Central Bankers. The financial class now tells the politicians what to do and the masses of the polity have no one to serve them.
The politicians will eventually have to take responsibility again. Either the current group of politicians must awake and seize back their power and begin to serve the polity, or a new group of political leaders will emerge from the chaos of the upcoming economic collapse. Sooner or later, we will see a savers and takers scenario emerge!
This is economics for the rest of us!
End of rant.