Could We Exist Without a Central Bank?
The Daily Reckoning
July 9th, 2012
Reader Views: 139
Yesterday, the saints at central banks in China, Europe and the UK said they would perform what could only be a miracle. The world economy wheezes, rattles and shakes because it has been poisoned by too much debt. The central bankers offer a cure ā more debt!
āCentral banks take action,ā is the headline in todayāsĀ Financial Times. āMoves to stimulate global economy,ā theĀ FTĀ described them.
But what really got our attention was the āgod particleā story. Without it, say the scientists who tracked it down, we wouldnāt exist.
Of course, you could say that about a lot of things. Without air, we wouldnāt exist. Or water. Or sunlight.
Could we exist without Homeland Security? Without Twitter? Without rap music?
Apparently so. We didā¦for many thousands of years. Happily.
Could we exist without a central bank? Many people would reply ānoāā¦
Some would say so because they are ignorant. Others would say so because they are just stupid. But any sensible person would admit that human life could exist without a central bank.
The US had no central bank before 1913. It had higher rates of GDP growth back then. It had a stronger currency too ā the dollar of 1913 was worth about the same as a dollar of one hundred years earlier. Now, itās worth about 3 centsā¦and disappearing fast. On the surface of the argument, it would appear that Americaās central bank has actually made things worse. Maybe that is a coincidence; post hoc ergo propter hocā¦and all that. But maybe there is a cause and effect relationship. Maybe a central bank CAUSES the economy to produce less wealthā¦and CAUSES the currency to lose value.
But central bank apologists insist that times have changed. Modern economies canāt exist without them, they claim.
Maybe. All we can say for sure, without benefit of a giant particle collider, or a know-it-all economist, is that the Fed is not the same as the God Particle; the former is a fairly recent innovationā¦but the latter has always been with us.
The Higgs-Boson particle is very small. And very short-lived. No one has ever actually seen it. However, the scientists who get paid to do this sort of thing assure us that it is a big deal, despite whatĀ The Financial TimesĀ may think. TheĀ FTĀ put the āgod particleā below the Libor story yesterday, which perhaps shows that the paper has its priorities wrongā¦or that finance now IS actually more important than God.
According to the reports, Higgs-Boson is the thing that gives mass to other things. For us, this just raises more questions than it answers. It does not explain why other things need massā¦nor why they didnāt have it in the pastā¦nor where Higgs-Boson got itā¦nor what the recipients plan to do with it. The giving of mass, againā¦we supposeā¦based on what we read in the paperā¦and our experience of actually going to mass in the Catholic churchā¦is what makes the particle godlike.
Which merely deepens the mystery for us. God himself would not seem to require mass. He is not like a block of wood, after all. He is more a part of the spirit worldā¦which sounds a bit like the world Higgs-Boson inhabits.
And while we accept that He can do what he wants, we also feel justified in assuming that Heās not out to get us with some nasty trickā¦or merely looking out for NUMERO UNO.
Which makes this very different from the Libor story or the central bank story. In the Libor scandal we found Barclayās bank insiders setting interest rates to suit themselvesā¦rather than letting willing buyers and sellers set rates for themselves. This is, of course, more or less what weād expected them to be up toā¦manipulating interest rates, lower, for their own benefit. Both the Chairman of Barclayās and its chief executive have been forced out as a result.
But waitā¦isnāt manipulating interest rates lower exactly the subject of the central bank story too? The BoE, the BoC and the ECB are pushing down rates, just like the Barclay boys. They think they have the right. They say it will help stimulate growth.
Could the universe still exist without these interest rate manipulators? We donāt know; but weād like to find out!
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Contributed by Bill Bonner of The Daily Reckoning.
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