Tuesday, May 20, 2008

Central Bank Idolatry

What is it about central bankers that inspires idolatry in certain observers? Hier encore Alan Greenspan's genius was being extolled alongside Einstein's and Newton's. That idol has fallen, but now it's the turn, apparently, of Jean-Claude Trichet--at least in the eyes of Jean Quatremer. There ought to be a convenient filter--a sort of verbal equivalent of the Hodrick-Prescott filter--that could be applied to economic journalism to filter out the hype. By some still unstudied law of nature, noise in the economic statistics seems to generate still greater noise in the journalistic representations. So for Quatremer, Trichet's tight-money policies are responsible for everything good in the world: European growth more robust than anticipated, European insulation from the American subprime crisis, German export growth in defiance of the strong euro, etc. It takes a true believer to deliver hosannas of this sort, and Quatremer seems even more Catholic than the Pope in this particular church. Trichet certainly does not believe that he has insulated Europe from the credit crisis. He reiterated just the other day a warning that the worst was yet to come.

Wherever there is belief, desire to believe precedes it. Quatremer's position is symptomatic of a certain form of such desire: the conviction that because democratic polities reflect contradictory interests and wishes, stability depends on the imposition from without of a "superior rationality" impervious to the irrational instincts of the masses. Central banking is endowed with all the distinguishing attributes of this superior rationality: it calculates, it is "calm even in catastrophe" (to borrow a phrase from van Gogh), it thinks not in terms of the velleities of the moment but sub specie aeternitatis.

Until the next turn of the screw.

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