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BIS: Asian Central Banks Are Pretty Good!

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Daily Bell
April 20, 2012

Bank for International Settlements working paper studies price stability in Asia; concludes that monetary policy frameworks have been effective … A Bank for International Settlements working paper, released on April 18, lauds the monetary policy frameworks adopted by Asian central banks in achieving price stability since the Asian financial crisis. The paper’s author, Andrew Filardo, writes that the monetary policy frameworks adopted by Asian central banks since the financial crisis in the region have “worked well both to ensure price stability during the pre-crisis period and to navigate the shoals during the recent international financial crisis”. The author does, however, sound a note of caution, saying: “Existing monetary policy frameworks in Asia may be contributing to pro-cyclical inflation swings.” – Centralbank.com

Dominant Social Theme: Those Asian banks are swell. We could learn some lessons from them.

Free-Market Analysis: What kind of snow are they eating in Switzerland? Monopoly private/public central banking has been a failure wherever it has been tried.

The reason is very simple. Those who are in charge of printing money don’t ever know how much to print. As a result they always over-print. And this inflation eventually generates price inflation and then … ruin.

This is ineluctable. It will happen whether the power is held by private bankers or by “public” servants. The issue is monopoly money. If you have the power to print money and no one else does, you will inevitably abuse it. Here’s something from the “working paper” itself:

The international financial crisis that began in 2007 tested the integrity of monetary policy frameworks in Asia. The region was hit hard by the financial storms originating outside the region, especially in late 2008 and early 2009. Macroeconomic performance and Asian financial markets suffered. One important question to consider is the role domestic monetary policy played in Asia during this period. This paper attempts to assess this role, arguing that, on the whole, monetary frameworks adopted prior to the crisis served the region well. However, the recovery period has presented a number of price stability challenges which suggest a need to refine existing frameworks …

The Asian record during the crisis also highlights the importance of flexibly responding to economic and financial developments. Asian monetary policymakers could not completely shield themselves from the consequences of the problems in the West. At various points in the crisis, volatility spiked in the region and uncertainties about the future multiplied. The experience of the crisis illustrated that the Asian policy approach needs to change given the circumstances.

  • A d v e r t i s e m e n t

During normal times, Asian monetary policy focused on price stability. During crisis times, however, the priorities of central banks were more varied, and required some flexibility in assigning weight to these priorities. This experience underscores the importance of putting more weight on financial stability when worrisome tail risks become immediate, at the cost of somewhat higher short-term inflation stability. One way to characterise this pattern of responses is to say that Asian monetary policy frameworks allow a fair amount of state dependence. In other words, what works well in normal times may not be best in periods of turmoil.

With all due respect, this is just terminal gobbledygook. Especially the last paragraph where the author refers to “crisis times” and explains that, “the priorities of central banks were more varied, and required some flexibility in assigning weight to these priorities.”

What this means (when we unpack the “secret code” of euphemisms) is that Asian central banks printed more money when the paraphernalia of central banking was seizing up around the world.

They did exactly what Western economies did, in other words. Why didn’t Asian economies get crushed the way the Western economies have been crushed, starting in 2008?

OK … wait!

Asian economies are based on monopoly fiat money just like Western economies. The overprinting of money is always deleterious to economic growth. Sometimes the syndrome takes longer to show up than other times.

The Asian economies had a huge and disastrous blow-off in the 1990s, popularly known as the Asian Contagion. This somewhat undistorted markets in Asia and set the stage for the current disastrous run-up.

The West didn’t suffer from this same purge – or not so dramatically. Thus, when Western central banking collapsed it had further to fall. And it is taking a good deal longer to unwind local economies because of the built-in distortions and reluctance of Western central banks to shutter their failing financial institutions.

But eventually Asian economies will once again fail, probably when China does – if it does. All central banking economies fail from time to time because the phony money puffs up the economy and then deflates it.

This is part of a larger, ineluctable business cycle. During this cycle, inevitably papers are printed claiming the business cycle has been abolished or this or that central bank is “well managed.”

The Asian central banks are no better or worse managed than any other central bank. They are merely at a slightly different place in the same destructive cycle.

There is no such thing as well-managed monopoly-fiat central bank. They are facilities designed to give a small group of dynastic families the leverage to create what they apparently want … world government.

It is these families and their enablers and associates that have foisted central banking on the world in the past century. There were very few one hundred years ago. Today there are nearly 150 plus the BIS, which is a kind of “uber” central bank, the manager.

These banks have millions of enablers. There are tens of thousands of economists willing to defend them and to write all sorts of things to help sustain their tenure. But nothing can justify monopoly-fiat central banking. They are engines of rapine and ruin.

Or use another metaphor. They are a kind of Trojan horse – that appears to be a noble and useful creature but is actually a preparation for ongoing, endless ruin that if pursued steadily enough shall echo in agony down through the ages.

Conclusion: The stakes are high and they are not reflected in self-serving white papers from the Bank of International Settlements. A little honesty would help. Is that too much to expect?

 

This article was posted: Friday, April 20, 2012 at 2:47 am





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