The Cult of Central Banking

"Under Chairman Bernanke, the combination of ZIRP and QE completed the passage of the Fed from sober protector of a fiat currency to an ineffective collection of frantically-flailing, over-educated, posturing bureaucrats engaged in ever more astounding experiments in monetary extremism.

If you look at the history of Fed policy from Greenspan to Bernanke, you see two broad and destructive paths quite clearly.  One path is the cult of central banking, in which the central bank gradually acquired the mantle of all-knowing guru and maestro, capable of fine-tuning the global economy and financial system, despite their infinite complexity.  On this path traveled ignorance, carelessness, and a rigid and narrow orthodoxy substituting for an open-minded quest to understand exactly what the modern financial system actually is and how it really works.  The second path is one of lower and lower discipline, less and less conservative stewardship of the precious confidence that is all that stands between fiat currency and monetary ruin.  Monetary debasement in its chronic form erodes people's savings.  In its acute and later stages, it can destroy the social cohesion of a society as wealth is stolen and/or created not by ideas, effort and leadership, but rather by the wild swings of asset prices engendered by the loss of any anchor to enduring value.  In that phase, wealth and credit assets (debt) are confiscated or devalued by various means, including inflation and taxation, or by changes to laws relating to the rights of asset holders.  Speculators win, savers are destroyed, and the ties that bind either fray or rip

We see no signs that our leaders possess the understanding, courage, or discipline to avoid this."

Paul Singer