Meet the new Central Banker — a cannabilistic Willie Sutton.
“Because that”s where the money is.”
— Willie Sutton, 1930”s bank robber,
when asked why he robs banks.
Perhaps yesterday”s action by the Swiss had much more impact beyond the Franc. It is the surprise they managed, and what that reveals about a new phase of how Central Bankers will start acting.
Uncapping the currency so surprisingly means more than keeping their plans quiet in advance. They outright lied, as the statements they had been making up to the prior day are now proved as entirely misdirecting.
To be sure, I”m not breaking the news that one Central Bank has been caught lying. That evidence pile has been growing taller for years.
The greater impact is whom the SNB lies affected, and to whom they lied — which, apparently, is everyone. Central Banker lies previously could at least be assumed as part of a coordinated strategy. Viewed through that prism, their eventual effects could be deduced, weighed and discounted. Life went on.
Markets could function in that regime because the collective powers-that-be could function in that regime. Emphasis on the word, “collective.” Times change. Surely, SNB isn”t the first among its co-conspirators to have noticed what the common sensical world has long known — their monetary manipulations are not helping. Their moves benefit a tiny fraction of the already well-off, while harming the condition and prospects of the vast majority.
Years of suppressing interest rates and of perverting price discovery has painted Central Banks into a corner. The economic fat they”ve been nibbling at for years by fiat has been reduced to just skin and bones. SNB probably isn”t the first gang member to notice — it is just the first to act. With respect to John Nash, the equilibrium in a non-zero sum game will tilt uncontrollably as the total sum approaches zero.
Where do cannibals turn when all other tribes have been devoured? On each other. And when you”re a member of the Central Banker tribe, well, Willie Sutton knew… that”s where the money is.
To call this a watershed moment is an understatement. But that”s where my analysis of it leaves off, since Central Banks aren”t otherwise my expertise. Analyzing the tools and effects of their meddling isn”t in my bag of tricks. I assume that very few of those who do carry that analytical bag were expecting this surprise would be found among the Central Banks” bag of tricks.
What shall we label this particular Central Bank trick? My suggestion would be to call it, “telling the truth.” Again, they”re not my specialty, so I”m not sure whether this concept can even apply to their kind. How wonderful it would be if all Central Bankers were to always play truthfully with the rest of us.
But, how violent the path from here to there.