Tuesday, 21 April 2009

Boom and bust and central banks

I just finished reading a very opinionated article which concludes with the following remark that is offered as if it is self evidently true:

Severe boom-bust cycles are entirely a man-made event created and precisely controlled by Central Bankers.

I find such remarks to be ultimately patronizing, as they suggest that the author is in possession of some superior knowledge or insight that mere mortals have not attained. Anyway just for fun here is the comment that I submitted:

Your thesis subscribes to the "conspiracy" view rather than the more mundane and more likely "cock-up" view

Even if one was to agree that boom and bust may be "created by" central bankers (without the capital letters) it could just as easily be claimed that it is a result of their screw ups rather than through any "precise control". In fact the notion that the central bankers precisely manipulate such events is in contradiction to the point being made about keeping your enemy confused. Precise control would leave footprints that smart market players would eventually recognize and be able to anticipate and that, in turn, would subvert the very control of events that you are alleging.

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