Central banks have no more control over their economies than gnats have over elephants.

Is the Bank of Canada in control of the Canadian economy?

Is that which, just yesterday, and quite unexpectedlyi cut its overnight lending rate from 1% to 0.75% to prop up a housing bubble and keep igloo-dwellers feeling rich, all based on the presumption that a $50 reduction in a mortgage payment, the likes of which will take years to trickle down to the consumer level if it trickles down at all, will matter in the slightest at a time when oil pricesii are tanking and higher taxes seem to be right around the corner?

Similarly, is the Russian Ministry of Finance in control of its economy?

Curious George: “Paul Waldie @pwaldieGLOBE No go: Russia sold only a fifth of the bonds it offered at first debt auction since November as borrowing costs soared amid mounting risks.” << Is this bad for the mother land?
The Man In The Yellow Hat: “The Finance Ministry rejected 87 percent of the bids received at an auction of 5 billion rubles ($76 million) of May 2016 notes today.” << Let me ask you, who is in control here? The buyers or the sellers?
CG: Sounds like the sellers.
TMITYH: Buyers trying to low-ball, pretending like they’re in control, papa bear flicks the mosquitos off his arm and tells them where to go.
CG: Makes sense.

Sure, both central banks look like they’re in the driver’s seat, just like the ECB lends the appearance that they’re “stimulating the economy” with their new $trillion bond buying program inflation tax.iii

If you’ve read the financial news headlines recently, you’d swear that each central bank governor could make it rain from the heavens on command, that each of these shamans in suits had the privileged ear of God. You’d also swear that there’s an all-out currency war afoot, with each central bank governor trying to outwit and outlast the others.iv

Of course, behind the veil, there’s really no such thing. All the posturing, all the press conferences, and all the forward guidance in the world, all aiming to shepherd markets higher in a never-ending ascent towards Valhalla, are but smoke. Reach for it, and your hand will feel nothing but air. One gnat with his two little skin pores to bite or not bite can no more steer an elephant to water than can a central bank governor improve his economy. That’s just not how complex systems work. No matter how hard they try.

Bitcoin, quite sensibly, does away with all this frippery.

There’s no Governor of Bitcoin, no CEO, and no High Chancellor of the monetary supply. There’s simply the math. Ding-ding-ding mine the blocks. Every 10 minutes on average. That’s it, that’s all.

No one’s inflating Bitcoin unpredictably, no one’s trying to “surprise markets” by changing its interest rates, and no one can scratch Bitcoin’s back during its election campaign to buy political favours later. This is entirely the point: Bitcoin’s an incorruptible foundation for an economy.

Sure, there’s still policy to be set and fun to be had.v After all, someone has to protect the codebase, foster legitimate businesses, offer job opportunities, dispel myths, and poke fun at the slow kids.

But hey, that’s what #bitcoin-assets is for, right?




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  1. This being the first BoC rate cut in almost 4.5 years.
  2. Oil is the beating heart of Alberta, itself the beating heart of the country’s economy. Pretty fragile, eh?
  3. Forget the rhetoric of “stimulation” and “shovel-ready projects” and ask yourself: cui bono?

    For the most part, it’s individuals with massive amounts of debt as well as those in line to benefit from infrastructure spending that stimulus spending seems to necessarily entail. So, politicians who don’t have the political chips to raise taxes but have made campaign promises they must keep in order to be re-elected or have their party be re-elected, construction companies, construction financing companies, property developers, etc.

  4. Yes, EUR/CAD is up to 1.433, but that’s about average over the last decade. And yes, CAD/CHF is at a 10-year low of 0.702, making Lindt chocolate and ritalin that much more expensive, but it’s probably a reasonable price to pay for the enjoyment of watching all these central bankers unwittingly push good men into the arms of La Serenissima.

    Dear good men: get thee to the yeshiva pronto! Faber est quisque fortunae suae!

  5. In fact, there’s far more time for fun when you’re not sitting on pins and needles waiting for some shyster to “make it rain.”

8 thoughts on “Central banks have no more control over their economies than gnats have over elephants.

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