Business

Thursday 18 October 2018

Central Bank's mantra appears to be: do as we say, not as we do

THERE is a neat symmetry about the reports this week that the Central Bank is indeed ploughing ahead with plans to buy the half-finished Anglo Irish Bank headquarters in Dublin's Docklands area.

The building built for the bank that destroyed Ireland's reputation will now house the bank that did not lift a finger to prevent this from happening.

That the Central Bank of a bankrupt country pays its senior officials more than their counterparts in the United States is bad enough. That these monetary mandarins must also be housed in luxury is even worse.

We will doubtless be treated to a discourse by the Central Bank on how it is actually saving us money by moving to swanky new offices.

We will also doubtless be told that the bank has had to expand to ensure proper supervision of the banking sector, but it is unlikely that we will ever see the proof for these assertions.

And without proof, we should not believe the self-interested claims that money is being saved.

More than 2,000 years ago, the Roman satirist Juvenal asked who should watch the watchers. We still don't know the answer today.

Central bankers are different to the rest of us. They can pretty much do what they want to because they print the money we all need to survive.

This power leads to hubris and sometimes even downfall. Switzerland's central bank recently lost a governor and even the Bundesbank lost governor Ernst Welteke eight years ago when one of the banks he supervised paid for a hotel room during celebrations to introduce the euro.

Just because central banks are printing money like there is no tomorrow these days, does not mean that they should be allowed to spend the stuff.

One of the many failures linked to the introduction of the euro has been the failure to reduce the size of the eurozone's 17 central banks.

Duplication

'The Economist' wrote a few years ago that the European System of Central Banks, as the ECB and the national central banks are jointly called, "is bloated and rife with duplication" and noted that the euro area employs twice as many central bankers as the United States, in proportion to their populations.

There are many examples of this extravagance here, but one example will have to serve: the ridiculous decision to continue printing euro notes in Sandyford in Dublin when those notes could be printed much more cheaply on existing presses elsewhere.

It is never pleasant to suggest that jobs are superfluous but the gigantic and heavily guarded presses in south Dublin are a colossal waste of money.

The ECB and its various branch managers are (rightly) quick to tell elected governments and their electorates that spending must be cut.

This cannot be denied in almost every country in the West. But the mantra sounds shrill and hollow when those who call for cuts house themselves in palaces and pay themselves princely salaries despite the fact that they no longer have much individual influence on rate setting or regulation anymore.

Indo Business

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