“Endgame For Central Bankers” Says Saxo Bank CIO

Courtesy of Mish .

Via email, Saxo bank CIO and chief economist Steen Jakobsen declares “Endgame for Central Bankers“. He also asks “Why is it that Most People Trust or Bother to Listen to Central Banks?“

Macro Digest: Endgame for Central Bankers

Steen Jakobsen

The SNB suddenly abandoning the CHF ceiling had wide consequences last week as we were all taken by surprise. The fact that it would and should happen eventually was not lost on the market, but the SNB was, as late as last weekend, talking tough and telling the market that the floor was an integral part of Swiss monetary policy. Then suddenly it was not.

I fully understand the rationale for the move (Jakobsen: SNB move is rationality itself) but, like most of the market, I remain extremely disappointed in the SNB’s communication and handling of the issue. But isn’t the bigger lesson or bigger question: Why is it that most people trust or bother to listen to central banks?

Major centrals banks claim to be independent, but they are all ultimately under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s well and good in principle until an economy or the effects of a monetary policy decision beginning spinning out of control. At zero bound for growth and for interest rates, politicians and central banks switch to survival mode, where rules are bent or even broken to fit an agenda of buying more time.

Just look at the Eurozone crisis over the past eight years: every single criteria of the EU treaty has been violated, in spirit of not strictly according to the letter of the law, all for the overarching aim of “keeping the show on the road”. No, the conclusion has to be that are no independent central banks anywhere! There are some who pretend to be, but none operates in a political vacuum.

That’s the reality of the moment. I would not be surprised to find that the Swiss Government overruled the SNB last week and the interesting question for this week of course will be if the German government will overrule the Bundesbank on QE to save face for the Euro Zone? Likely….

The most intense focus for the last few years in central

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