Friday, January 24, 2020

Followup from Q&A Interview with Robert Pringle

Recently, we published a Q&A style interview with Robert Pringle which you can view here. I wanted to select a couple of the questions and answers from the interview for additional emphasis for readers here. I have pasted them in below with a few additional comments I wanted to offer on these.


Q: Central banks have played a huge role in guiding the present monetary system for many years now. Can you discuss some of the pros and cons you have seen over time of the role central banks have played?

A: "The central bankers I have known have been decent, honourable and conscientious. Events thrust their institutions into positions of high authority and status. Even the smallest central bank makes decisions of crucial importance for its country and people. Their elevated position exposes them to high risks and what they often call ‘headwinds’. This is an understatement. 

If central banking were classed as an Olympic event, it would join such sports as surfing, skateboarding, karate, and rock climbing, at the extreme end of the sporting spectrum. 

Central banks served as midwives of our current monetary and economic regime. They helped to shape its present form.

Now they service and maintain critical financial networks that span the globe. Far from being detached bystanders, they have facilitated revolutionary changes - changes that affect the life chances of men and women everywhere. We are all inter-connected through this intricate and ever-expanding monetary spider-web. 

They have managed multiple crises as agents of governments. The costs have been high, but not catastrophic - not yet.

What central bankers evidently do not know is how to prevent crises from happening in the first place. They claim to have learnt from experience, but the public is rightly skeptical. To what extent their policies are actually responsible for social ills such as rising inequality, stagnant real living standards in many countries, sluggish investment, growing monopoly power (notably of Big Tech) rising popular anger and disrespect for elites and ‘experts’ is arguable. I suspect they have been a significant factor. President Trump plays a “Punch and Judy” show with Fed chair Powell  but that’s what it is - a show. Sound money is as far away as ever."
My added comments: A couple of points to make here for me. First, please note that these comments come from someone who has worked directly alongside many of the well known central bankers from around the world over the past several decades. So they have very high credibility for me.

The second point is to note that even those who work inside the system acknowledge that no one can control all the factors that can impact the stability of any monetary or financial system. This is why we have repeatedly stated here that readers should desire to stay informed and alert to events that can potentially impact systemic stability. Change comes eventually with the biggest question being what prompts the change and how quickly does it take place. In our view here, those are key unknowns to everyone including those who run the present system.

Q: Central bank critics say that the "easy money" policies used in the last few years have not solved our ongoing systemic problems. What are your thoughts on that?

A: "I agree with such criticisms. It has been business as usual - in the sense that the overall design of the policy response to the crisis follows an established pattern: bail outs, large-scale monetary and fiscal stimulus, more detailed and extensive regulation, interference in market determination of interest rates, long as well as short, resulting in the suspension of market signals normally deemed essential to the functioning of capitalism. This leads to more political pressure on the state to move in and undertake investments. The ultra low interest rates have in effect replaced inflation as a tax on the public - a tax that governments have taken full advantage of. The inevitably sluggish response of the economy then is used to justify further state borrowing - because it is thought to be “free” money. This crowds out the private sector.

This is more than a debt trap; it is, as I argued in my book of 2012, a ‘money trap’. The nature of our money is at the root of the problem. 

At a time when everybody expects another crisis, it is absurd to suggest policies have solved your systemic problem."

My added comments: Again, please note that Mr. Pringle agrees with critics who question whether central bank policies are really working to solve long term systemic problems. If he feels this way, we certainly need to take these issues seriously and realize that we need all the best information we can get to stay alert to any events that might impact the stability of our present system. 

Having just read his new book (The Power of Money), Robert Pringle goes far beyond the comment above. In the book, he calls on new thinking to emerge that could lead to a "reset" for our money so that in the future money becomes the servant of mankind rather than its master as it has so often been over time. 

He traces this history of money and its impact on society over the last 200 years. He talks about many hot topics of the day including the future of cash (he says it is not going away any time soon) and why gold has been and continues to be trusted the world over as a long term store of value (and why central banks own it but don't like the gold market as a commentary on their policy actions). He explains why credible and viable private sector alternatives to state sponsored money should be encouraged rather than suppressed. He says in the end, a society gets the money it deserves which is why we all need to learn as much as we can about these issues.

We all hope that future crisis will be avoided. But just assuming we won't get one and sticking our heads in the sand is a naive approach to say the least. In the book, perhaps the main theme was that money and monetary systems are never permanent and will eventually change over time and what we have now will also change at some point in the future. No one can really know what exactly will prompt the change or when it may happen, but history tells us it will happen as Robert Pringle shows clearly in the book.

This blog was created to encourage people to study these issues and take them seriously. Hopefully, as many people as possible will do that. This blog has archived many ideas related to these issues here on this page of the blog for anyone interested in learning more. There is a lot of information on that page you will not likely find on most media sources including some direct input from experts like Robert Pringle and others who want to see our money and our monetary system serve the people in the best way possible using what we can learn from history as a guide.

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