Trying times for Mr Popular
Being a central banker is a miserable job. You’re there to spoil everyone else’s fun. When the economy is booming, and everyone is having a good time, you’re meant to stop things from getting out of hand by raising interest rates. You have to be Mr Unpopular. This perhaps explains why most of them are so bad at the job.
Central bankers don’t like being unpopular any more than the rest of us do – they’re only human. And it’s almost always more comfortable to lower interest rates than to raise them. Why? Because free money makes you popular. People like it when the cost of their mortgage falls. Journalists praise you for not making the ‘mistakes’ that led to the Great Depression. Even the likes of Mervyn King – who was very capable of speaking bluntly about the dangers of the housing boom – was somewhat reluctant to take steps to derail it.
This desire for popular appeal also explains why the Federal Reserve is keen to downplay the idea that quantitative easing (QE) has played any part in driving up commodity prices. After all, rising share prices are usually seen as a good thing. But pumping up the cost of fuel, food and basic building materials is not. So Fed chief Ben Bernanke is still arguing that inflationary pressures will be “transitory” and that there’s no reason to stop QE prematurely. However, he’s coming up against some resistance from his fellow central bankers…
• Read the full editor’s letter here: Trying times for Mr Popular