Central bankers aren’t gods, even if a few of them sometimes think otherwise. For proof of their mortal status one need only survey the various errors linked to this group in the 21st century. Yes, many central bankers made good, even superb decisions. But there were also some rather large lapses in judgment in matters of monetary policy and related matters in recent years. Arguably the ill-advised decisions overwhelmed the brilliant ones. A number of central bankers tell us so.
Of course, the private sector made more than a few errors too. In sum, the blame for the current troubles stretches far and wide. But when it comes to concentrated power, and the capacity for generating pain or pleasure, central bankers are second to none. They’re an influential lot—influential on a grand scale. For that reason alone, listening to what they say is productive, or shocking—especially when they’re deconstructing what went wrong in the run-up to the crisis now pummeling the global economy.
With that in mind, here are a few choice quotes (courtesy of The Bank for International Settlements) from recent speeches by members of world’s most elite and potent financial club. We don’t necessarily agree with all that follows, although much of what follows certainly rings true. In any case, we’re listening closely.
Mario Draghi, governor, Bank of Italy, 16 December 2008
One striking aspect of the crisis is precisely how its unfolding has continued to catch both policy makers and private sector players by surprise. It started with defaults in a marginal segment of the financial services industry, then quickly spread to virtually all assets. From being a US-only event, it has become global, and in fact it is forcing and accelerating the redressing of world macro imbalances that have been with us for 15 years. The current recession is the result.