An October 25, 2008 Newsweek article by Jeffrey E. Garten
is titled, "We Need a Bank Of the World."
What I need is some sort of keystroke to represent
spluttering astonishment. There can only be a few things
on the list of what we need less than a World Central Bank
(a planet busting asteroid might be a tie-- other than that
I can't think of much).
Central Banks have been error making machines. They never
have and never will accomplish anything else, because
they've been given (or have taken) an impossible task--
money and credit expansion in a fiat currency system along
with (rather laughably), maintaining economic stability.
A Global Central Bank's most likely accomplishment would be
to ensure that any nation that ever has second thoughts and
wants to leave the fiat currency and credit creation rat
race, is instead trapped. From there the World Central
Bank can move on to booming and busting us all, with no
escape in any global nook or cranny, until every person,
place and thing in the world is exhausted.
Mostly lost in the recent credit follies with it's nexus in
the credit creation and credit collapse from the Federal
Reserve Bank of the United States (which admittedly has
been so egregious it needs the invention of another
computer short cut key-- maybe one that rolls all the
world's expletives into some kind of text and graphics
ball), are the multi-decade errors of the Bank of Japan.
Financial analysts are casual about the ripples from the
Yen Carry Trade (borrowing in Yen at low interest to
invest, or speculate, in vehicles under a higher interest
currency), as if it's just something that randomly
happened. But the Yen Carry Trade has been classic market
disruption and unintended consequences from central bank
force feeding of credit into a system that would
desperately prefer to puke it back. Instead of looking for
opportunities for stable production, Japanese money and
credit has been stampeding all over the globe for years,
looking for arbitrage opportunities.
Japan's Central Bank started with a real estate bubble,
moved on to the "zombification" of it's supposedly private
sector banking, and then, with rates near (or even at)
zero, has now clearly enabled a speculative emphasis in
global finance and the era of the hedge fund, the last
chapter of which is being written now (and looks to deserve
a pretty poor review).
The main contention of Garten's World Central Bank article
is that "the Fed no longer has the capability to lead
singlehandedly", a contention that would be perfectly true
if he would have substituted the words "never had" for "no
longer has"-- it's the exact same capability that a Global
Central Bank would continue the tradition of never having.
"To give it legitimacy" Garten continues, "a global central
bank would have to be governed in light of political
realities." Well that should be easy-- fortunately,
political realities are always simple and helpful. (As
Garten is able to demonstrate concretely in his nimble
salvation of the world in a thousand words, even while
reassuring us that we won't have to give up the political
realities that have been serving us so well.)
It makes sense though that we'll never have to give up our
cherished political realities if Garten has his way-- a
World Central Bank is a logical step in our main political
reality-- the steady march of centralized decision making
to higher and higher levels, so that we guarantee that
decisions are aggregated above the level at which it's
possible for any individual or structured group to make
them. No doubt someday we'll have an international
organization to tell your local T-Ball team what position
your 5 year old should play, and at that point, all our
dreams will come true (except maybe for a few confused kids
and cancelled T-Ball leagues.)
It appears that in the United States we're comfortably
adjusting our expectations as economic hybridization
ratchets to a level where we can no longer pretend that
"fascist" is just an insult to be sprayed around by
radicals. But at least we could refrain from demanding
that everyone else must wade around with us in the same
knee deep glue. Let's let other countries make, or perhaps
even not make, their own mistakes.
I'd suggest that any nation interested in financial
stability and fair opportunity should ignore this call to
global credit creation arms, eliminate its own central
bank, and raise banking reserve requirements to a sane
level as a simple fixed matter of law.
----------------------------------------------------
http://www.themaestrosrep.org
The Federal Reserve -- Poster quasi-governmental agency for
Banking Reform.
Les Lafave
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