Blaming Inflation on Central Banks? We Enabled Them
A new paper from inside the club says that central bankers became over-confident in their powers. But the public and politicians need to recognize who conferred them with godlike standing.
Raised too high? Former Fed chairmen Alan Greenspan and Paul Volcker in 2007.
Photographer: Chip Somodevilla/Getty
The secret is out. Central bankers aren’t deities, as much as we might have sometimes wished to attribute them with almost supernatural powers. Post-mortems on the surge in inflation and how it got away will run for years. Let’s not forget to look in the mirror: Did officials accrue too much influence and was society a willing accomplice, only too eager to confer that authority?
These are some of the uncomfortable questions that lurk behind a paper co-written by a former Reserve Bank of New Zealand chief, but its lessons go much wider than a little country of 5 million people in a corner of the Pacific. Graeme Wheeler, who led the RBNZ for five years, and Bryce Wilkinson, a former Kiwi Treasury official, argue that central bankers the world over became too confident in their own abilities and, alongside fiscal agencies, injected way too much money for too long for economies to handle. This problem was close to universal. Salvation, the authors say, may lie in fessing up and central bankers going about their business with a new and profound sense of humility.