Idolizing central bankers: German edition

It's one of the charming habits of the Very Serious People and financial writers who echo their conventional assumptions that central bankers are a high priesthood to be held in awe.

Here's an example from Spiegel Online's Stefan Kaiser in Zinsentscheid EZB: Draghis Frischgeld-Kur 04.06.2014. The eurozone is stuck in a depression and is sliding into deflation.

As Jens Berger notes in Schwaches Wachstum und Deflationsgefahr im Euroraum – letzte Hoffnung EZB? Nachdenkseiten 04.06.2014, Cyprus, Greece, Portugal and Slovakia are already experiencing deflation. So is the non-eurozone Sweden. Interest rates are hitting up against the zero lower bound. There's really not a lot that a central bank can do to stimulate the economy in the absence of a countercyclical, fiscal policy. And the

But writing of ECB President Mario Draghi, Kaiser says:

Draghi gilt heute als geldpolitischer Superheld - und seine Rede von damals als entscheidender Grund dafür, dass vom Ende des Euro niemand mehr spricht.

[Draghi is regarded today as a superhero - and speech from {two years ago on backstopping eurozone countries bonds} is taken as the decisive reason that no one is talking about the end of the euro any more.]

Yeah, he's regarded as a superhero of finance - by everyone who routines worships central banks as superheroes with magic, mystical power over money. And no one is talking about the end of the euro except for, well, pretty much everyone who is applying basic macroeconomic concepts to the current state of the eurozone economy.

And he writes, "Nun soll Draghi sein Wunder wiederholen - zumindest wenn es nach den Südländern geht." ("Now Draghi needs to repeat his miracle - at least when it has to do with the southern countries {of the eurozone}.") And the idolaters of central bank magic really mean it when they use religious/mystical words like "miracle" in this context.

The eurozone doesn't need a miracle. It needs an immediate policy of economic stimulus from Germany. One that Angela's Merkel's current Grand Coalition government has no intention of doing.

Paul Krugman has an observation of his own about the Very Serious Europeans 04/06/2014:

But there's this remarkable thing in Europe where critical voices simply aren't heard. Lars Svensson can spend years pointing out that the Riksbank is blowing it, and nobody listens at all until an outsider weighs in. Every economist with a lick of sense is terrified about the euro area's slide toward deflation, but the orthodox are surprised to hear that it's a problem.

It's true that sometimes you do need to have people come together to do the right thing. But in recent years it has been a reliable rule that when important people reach a consensus about something, they're dead wrong.

Tags: angela merkel, austerity economics, eu, euro, european union