On Thursday, some of the world’s most prominent policymakers and regulators met at the 18th Central Bank Conference on the Microstructure of Financial Markets in Washington, D.C. The title may be a mouthful, but much can be learned from Vice Chair Philip N. Jefferson as he identifies organizations taking part in the event, including:
… colleagues from the Bank of England, the Bank of Japan, and the Bank for International Settlements; and friends from across the Federal Reserve System and from several U.S. government agencies, such as the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and the U.S. Treasury, including the Office of Financial Research (OFR).
The Vice Chair shared his thoughts on how a concerted effort of intervention in the free market is of great importance to the economy, going so far as to say:
Effective and efficient financial markets do not happen automatically.
However, simply claiming something to be true does not make it so. It’s important to remember that the livelihood of policymakers depends on market dysfunction. They take the stance that a controlled market is better than a free one. We need only look at some of their esteemed colleagues at this event while reviewing recent headlines to see how they are managing their respective countries’ economic affairs.
Beginning with the Bank of England, a member of the Bank’s rate setting committee, Dr. Swati Dhingra, recently told the BBC:
The economy’s already flatlined. And we think only about 20% or 25% of the impact of the interest rate hikes have been fed through to the economy.
She’s also quoted as saying:
It’s not going to be great times ahead … There are just horror stories out there.
Luckily, we will get out of this. However, she explains:
… eventually when we come out of all of this, we’re going to see that possibly inequality is going to rise.
But that’s just one PhD’s expert opinion from the inner circle of a central bank…
As for the Bank of Japan (BOJ), their policymakers may not be as candid as those in England; but the BOJ remains as steadfast as ever in their unapologetic interventionism. On Friday Reuters ran the headline:
Bank of Japan intervenes as 10-year JGB yield hits new decade high
Japan’s debt is becoming increasingly expensive to manage. Yields on government bonds rose to 0.845%, a rate we could only dream of here, but still concerning due to their huge debt burden.
In response to this rate increase, the “highest since July 2013,” the central bank intervened as part of their yield curve control policy which aims to cap the 10-year yield at 1%.
It’s worth noting the Vice Chair also discussed organizations like the Bank for International Settlements, the CFTC, SEC, and the lesser-known OFR.
Given the shocking comments from England and dystopian policies in Japan, should individuals from these organizations really be engaging in conferences with members of the Federal Reserve?
It’s increasingly clear to the public that the strategies employed by central banks worldwide, including interventions by the Fed, aren’t yielding desired results. If anything can be considered true, it’s that market intervention is the problem; and if something is the problem, it can never be the solution.
