Sometimes I write something I think is fairly common knowledge among professionals and what comes back is astonishing. Our professional readers have poured in saying about time someone told the truth about how central bankers float ideas to test the market. But the shocker has been the response from political circles. There seems to be an amazement that the central bankers will not say the truth when testifying before Congress. It is not that they are lying. The point is they cannot tell the truth because everyone is listening.
I was giving an Institutional Seminar in Toronto. A group attended from the Central Bank of Canada – about 20-30 people. Everyone there knew who they were. The audience began asking me questions what was the central bank looking at for policy. I addressed the questions plainly stating the market expectations were flat-outright insane/wrong and that the central banks were not concerned with the machinations the market assumed. Every one would turn to look at their faces, which they kept stone cold.
When I was done, I went up to them and apologized if anything I bluntly said offended them. They said it was great. They wished they could stand up and yell you morons, we could care less about that nonsense. But they have to publicly appear stone face not to give a hint of anything either way. I began to realize we were needed to get info out and that served their purpose. Likewise, there were people in the German central bank that were feeding us info back before 1998 because they were against the Euro but could not say anything. So they fed us info of what was going on behind the curtain. They needed someone who was independent so it did not turn into inside-dealing.
They often called me the “priest” for central bankers needed someone to talk to. I discovered that the Bank of Canada would talk to me but nobody else – not even a finance minister of a Province. When I asked why, the reply was straight forward. (1) I was not Canadian, and (2) I was independent. If the Finance Minister of New Brunswick called and they told him but not the Finance Minister of Quebec, the ceiling would cave in. Likewise, they could not talk to a banker for that would be inside info. I found myself in a very unique position, but at the same time, I fulfilled what they needed, someone who could talk among all the banks and connect the dots.
So when Bernanke testifies, he is on guard. The politicians will never get the real answer in a public forum nor can they get a frank discussion without telling everyone. It is a strange world of conflicts and confidence. It keeps everyone generating theories, but that is just a guessing game.