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The end of central bank power? Or the start of more 'financial repression'?

By: Chris Powell, Secretary/Treasurer, GATA

 -- Published: Friday, 16 January 2015 | Print  | Disqus 

Dear Friend of GATA and Gold:

Former Wall Street trader and market commentator Bruce Krasting, in analysis publicized by Zero Hedge, argues that the Swiss National Bank's repudiation today of its pledge to peg the Swiss franc to the euro forever will mark the beginning of the end of central bank power.

Krasting writes: "The Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank, and other central banks have repeatedly made the same promises over the past half decade: 'Don't worry! We are here. We will do anything it takes to achieve the stability we desire. We are stronger than the markets. We can overwhelm all forces. We will never let go. Just trust us.' ... Anyone who continues to believes in the all-powerful central bank after today is a fool."

Well, maybe.

But arrogant as the Swiss National Bank has been and as humbled as it is now amid the devastation it has wrought, it is actually one of the smaller central banks and its influence has been vastly inflated by an outdated reputation for probity.

And while central bank power suddenly does looks shaky tonight, central banks are not alone in their never-ending war against free markets. No, central banks may be allied with the rest of their governments -- indeed, to a great extent central banks control their governments by financing them -- and governments may claim even greater power than central banks do.

Because of their power of infinite money creation, central banks can not only manipulate markets and thereby arbitrarily set the value of all capital, labor, goods, and services in the world. As lately has seemed to be their objective, central banks also can prevent markets from happening at all.

But central banks can't prosecute and imprison people and confiscate their property for perpetrating markets. Only the remainder of government can do that -- and some governments seem to consider themselves empowered to do that already even in nominally democratic countries. For example:

That's why any slippage in central bank power, like today's humiliation of the Swiss National Bank, is less likely to result in the liberation of markets than in an increase in what even some central bankers themselves call "financial repression":

That is, when central banks fail at market manipulation, governments may resort to wage and price controls, capital controls, rationing, and even confiscation of property and limits on travel.

But if things come to that, at least the pretense of free markets that Western mainstream financial news organizations play along with will be exploded and even people who couldn't distinguish a derivative from an asparagus will know where they stand, know that something has happened to their democracy. Even the Financial Times might feel compelled to report it.

Krasting's commentary is headlined "End of Central Bank Power -- Swiss National Bank Folds" and it's posted at his Internet site,, here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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