Today’s myth: the almighty central bankers

Throughout history man has always created myths and legends to help explaining natural phenomena or to boast about somebody’s achievements. Whether these stories were real or not it was never the point, myths and legends are entertaining and the man kind is always looking to creating new ones. In this post I will try to make a comparison between an old Celtic myth and our today’s most legendary figures: the almighty central bankers. Leprechauns are part of the Irish folklore but these fairy tales took inspiration from similar figures that appeared much earlier, in the Celtic mythology. Today we depict leprechauns as little bearded men wearing green clothes that hide pots of gold under rainbows. If you catch one of them he will grant you 3 wishes in exchange for his freedom.

fotomontaggio with logo

Central bankers instead, can be man or women, that live in ivory towers, isolated from the rest of the world, and they never have to experience pains and problems from the everyday life as they have the power to print money. Let’s find the first differences in these 2 mythological figures, the obvious one is that Leprechauns hold gold while central bankers hold cash (colored paper banknotes on which they print a number that represent the value that banknote). This leads us to a second difference, there is a finite amount of gold in the world, therefore Leprechauns cannot create their wealth out of thin air. The central bankers instead, can print unlimited amount of money, while their wealth remains the same, by printing more money they generate the illusion of more wealth. If there are more banknotes in circulation, their currency will be worth less and as consequence they will need more money to buy stuff. The problem in the case of central bankers is that we share the same currency, therefore they have power over the value of our currency. If average Joe worked hard during his life and saved 50,000 $ he may feel a little pissed off if one day a central bankers appears and start printing money, because his 50,000$ will now be worth less, central bankers can destroy the value of your savings, but as I said earlier, central bankers have no power over wealth, they cannot destroy nor create it. Our Joe lost quite a bit of wealth, where did it go?To the central bankers of course because they printed more money. In turn, they will redistribute all this wealth to their employers in Goldman Sachs and to other banks by buying their stocks and by lending money to them for free. Our average Joe is too busy working and spends most of his free time reading about kardashians or watching TV. Joe trusts his government and because he doesn’t read about economics, he doesn’t understand why his money are now worth less, he just thinks that if central bankers print money it will be good for the economy. This is the core of this Myth, we believe that these creatures (the central bankers) have the power to save our economies, but their actions are only destroying our savings. Considering all of the above, Leprechauns seem quite smart creatures, they have their savings in gold and they live in Ireland, a country with one of the lowest corporate taxes in the world. Our generation will be remembered as the generation that created the myth of the central bankers, but it’s never too late to wake up. As all fairy tales there will be an end, it doesn’t have to end badly.

By Gianluca Fontana

Filed in: Economy Tags: , , , , , ,

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