By Sean Corrigan
In the midst of all the recent uproar, one anonymous Twitterer seized his chance to have his Uber-Warholian, 140-characters-of-fame moment and thundered: ‘Central banks are losing control of this market!’ no doubt eliciting whatever the social media equivalent of a cry of ‘Hear! Hear!’ and an approbatory nodding of the head might be from among his followers.
In truth, that such a sentiment could even be expressed shows how far from grace we have fallen. It truly is a thing of wonder that a small, secretive panel of bureaucrats, career politicians, and largely second-string—if comfortably conformist—academics should be thought to have the duty—as well as, Saints preserve us, the means at their disposal—to ensure that no-one speculating in financial markets should ever suffer a serious loss, or that no company’s share price or bond spread should ever move in too adverse a fashion.
Though the history of central banks is nothing if not a tale of unplanned interventions, derogations from the law, behind-closed-doors horse-trading, and hazardous improvisation—often spiced up with a decent dose of personal and institutional favouritism—it has surely never previously been assumed that their role is to act as playground supervisors in quite this way.
Yes, it has been their lot firstly to keep the domestic currency convertible into the international ones of gold or US dollars and, by extension, for trying to manage the balance of payments. Yes, they have gained their often lucrative prerogatives by dint of the assistance they could offer to their sovereign in his conduct of what we would now recognise as fiscal policy. Yes, they have been called in to act as lender of last resort when less privileged banks have pushed the heady temptations offered by fractional reserve banking too far beyond the bounds of prudence.