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Ummm, It Was the Central Bankers' Fault

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Tuesday, 03 August 2010 04:36

The NYT had an article on the hostility being directed toward the head of Hungary's central bank. The article implies that such hostility is misdirected, beginning the piece with the comment: "it’s not easy being a central banker in Europe — especially during the biggest economic crisis in a generation"

This comment is sort of like saying that it's not easy to be head of BP, especially in the middle of the largest oil spill in the history of the world. The reason that we are having the economic crisis is because of the failure of Europe's central bankers to notice the huge housing bubbles that were distorting economies throughout Europe and much of the world. If Europe's central bankers had been doing their job competently they would have acted to rein in these bubbles before they grew large enough to endanger the economy. Instead, they were obsessed with reaching their 2.0 percent inflation target.

Comments (5)Add Comment
it'a easy being green
written by frankenduf, August 03, 2010 9:27
this is an error by tautology- it's always easy being a banker, where ur salary to social productivity ratio has been approaching negative infinity, if i remember my astronomical math correctly (very large # divided by very large negative #)
...
written by izzatzo, August 03, 2010 10:35
Uh huh. The "easy" jobs are in areas like the explosive growth of mind-numbing security jobs, most of which require little more skill than working in a call center.

The "easy" jobs are in fast food and big box stores and elderly health care, especially when filled by vastly over educated and over trained workers booted out of their former jobs.

The "easy" jobs are part time at odd hours with high turnover, no insurance and subject to rude and abusive supervisors and immediate suspension.

Of course the top end of "easy" jobs is being unemployed, collecting unemployment for doing nothing, like bankers pay.

Let's see, where exactly did the going get tough and the tough get going, can't seem to find it anymore, that buck that was supposed to stop at someone's desk keeps getting passed on. It's not easy passing that buck on, takes real skill it does.
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written by par4, August 03, 2010 6:14
It seems to me all of these European allies of ours were just following the U.S.'s lead. We've cajoled and threatened most of the world since the end of WW II so we shouldn't expect them to break with us yet,although they probably should.
Can a monopoly monetary system always work well and keep unemployment and inflation low?
written by floccina, August 04, 2010 11:03
If Europe's central bankers had been doing their job competently they would have acted to rein in these bubbles before they grew large enough to endanger the economy.


The question is can a monopoly monetary system work and can it evolve fast enough to keep up with a changing world.

I think Greenspan screwed up but I have some sympathy for his position that things looked OK and so he tried to let things go. You and others had long said that fed policy was too tight keeping demand for labor lower than it should be so he gave it a try.

I think that we need a more competitive monetary system.
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written by floccina, August 04, 2010 11:05
BTW we have a system that has a serious feedback problem. The failure of a bank weakens rather than strengthens other banks.

That is a serious systemic problem!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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