Be worried: Mervyn King is relaxed about inflation
Central bankers have a poor record when it comes to predicting economic turmoil.
Why do people still pay attention to central bankers? The last decade has shown that they're as clueless as anyone else when it comes to spotting bubbles and dealing with consequent disasters. Transcripts of US Federal Reserve meetings in 2007 have just been released, and they show the US central bank's members failing to grasp the scale of the impending crisis.
As 2007 began, "the Fed was still complacently disregarding problems in the housing market", says Binyamin Applebaum in The New York Times. They could see people losing their homes and subprime lenders falling like flies, but "did not understand the implications for the broader economy".
Fed chairman Ben Bernanke said in March he thought that the subprime sector's impact on the broader economy was likely to be "contained". Fed board member William Poole opined in August that signs of potential turmoil in the financial markets wouldn't affect the real economy and Bernanke said he reckoned the "markets will stabilise".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In June 2007, Timothy Geithner who later became Treasury Secretary played down the potential impact of two Bear Stearns hedge funds collapsing, yet they proved to be a warning of things to come. Only late in 2007, as it became clear that markets were seizing up, did the Fed rush to provide liquidity and slash interest rates.
Given the central bankers' poor record, it's rather worrying that they don't think all this money-printing could lead to inflation. Bernanke says he's "100% confident" he can control it. Mervyn King is also very relaxed about price rises.
This is the same Mervyn King who said in September 2007 that there would be "no lasting damage" to Britain's banking system following Northern Rock's collapse and that people "won't be talking about [it] a year from now". We have been warned.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
Are you one of 15 million people at risk of retirement poverty?
Two-fifths of people in the UK aren’t on track for a minimum lifestyle in retirement, new data shows. Are there steps you can take to boost your pension?
-
150 banking hubs now open across UK – is there one near you?
As the 150th banking hub opens its doors, a Post Office deal that offers basic banking services has also been extended until 2030. We explain what this means for you