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Humblebrags and Humiliation at the ECB

The ever-so-humble European Central Bank...
WHAT MAKES a central banker good or bad? asks Adrian Ash at BullionVault.
That's a trick question, of course, for followers of what's become known as 'Austrian' economics, certainly the USA strain...
...because all central banking is bad! Bad! BAD! The original sin no less of economic malaise.
Outside the gospel according to St.Rothbard however, you might think that "good" or "bad" policy sets the boundary between good or bad policymakers.
Simply put, "The core mission of any central bank is to get monetary policy right," suggested Bruno Gehrig, then vice chairman of the Swiss National Bank, said at a 2001 conference on the subject...
"The rest, including transparency, is of secondary importance."
What does "getting it right" look like? Not this, at a guess...
Major economies' average CPI inflation (blue) and Euro-area inflation (blue). Source: OECD
But getting policy "right" rather than being "on message" sounds dreadfully last-century today. And it has done for well over a decade already.
"I would stress several attitudes that seem to me more important than in the past," said then-president of the European Central Bank Jean-Claude Trichet at summer 2010's Jackson Hole central-bank symposium:
"First, the need to be humble...the need to be alert...[and] the need for swift action."
We'll return to Trichet's personal record of humility, alertness and swift action in due course. Because in 2019, his successor as ECB president – Mario Draghi – named his own trio of " qualities [for] good decision-making...
"Knowledge, courage and humility."
Now roll onto August 2023's Jackson Hole central banking conference, and Draghi's follow-up at the helm of the 20-nation Euro – Christine Lagarde – last week offered yet another list of "three key elements" to her audience in Wyoming...
"Clarity, flexibility and humility."
So, that makes alertness, swift action, knowledge, courage, clarity and flexibility the key ingredients for good central banking. Plus, three times over, humility. Which is lucky for the 350 million citizens of the Euro-area today.
Because the European Central Bank's current boss has got humility in spades.
"I was humbled to be awarded an honorary degree by the London School of Economics earlier this week," tweeted current ECB chief Lagarde to her 700,000 followers in summer last year.
"Thank you so much for this prestigious honour!"
A year before that, Lagarde noted that she had said "held public office throughout two decades of crises...But each crisis has taught us a valuable lesson...
This royal "we" has also shown humility in how it speaks, as Lagarde then told Jackson Hole last week, saying that "We must remain clear in our objectives, flexible in our analysis, and humble in how we communicate."
You might know this kind of stuff as a "humblebrag". The term was coined by late comedy-writer Harris Wittels. It means "basically a specific type of bragging which masks the brag in a faux-humble guise.
"The false humility allows the offender to boast their 'achievements' without any sense of shame or guilt. Humblebragging is very commonly used in our society, and for some reason Twitter seems to be the perfect forum for people to do it."
Cue @Lagarde!
A short selection of tweets (or is it Xs now?) from @Lagarde
Put another way, "Whenever I feel particularly humble, I tweet about myself," as columnist David Brooks noted of Lagarde's humility in an article for The Atlantic magazine back in July last year.
Picking up on Harris Wittels' theme, Brooks even did what any good ECB policymaker would do, and offered key points to remember:
"Always use the word humbled when the word proud would actually be more accurate...Never tweet about any event that could actually lead to humility."
Now, given that Brooks called out Lagarde almost 14 months ago, you might expect she'd be wary of humblebragging over humility. But maybe she has never read the piece. Maybe that's because she is in fact too humble ever to Google herself.
If that's the case, such humility would come with good reason. Because the ECB has much to be humble about right now.
Germany overnight interest rate (green) and average wage growth (blue) both adjusted for CPI inflation. Source: St.Louis Fed via OECD
Back in late 2021, Euro-area inflation was jumping towards 5% per year, the fastest inflation since the single-currency project began to take shape in the early 1990s.
ECB interest rates, in contrast, remained at the record lows set by Lagarde and her fellow central bank policymakers during the Covid pandemic. Indeed, the rate paid by the ECB on commercial bank deposits at the central bank were minus 0.5%...
...meaning that banks paid the ECB half-a-point per year, even before you account for inflation, and they were increasingly passing that cost onto their own depositors, meaning Eurozone businesses and the general public.
What would humility do?
"An undue tightening of financing conditions is not desirable at a time when purchasing power is already being squeezed by higher energy and fuel bills," Lagarde said in a November 2021 speech.
"It would represent an unwarranted headwind for the recovery," and so any thought of raising interest rates in 2022 looked "highly unlikely".
Hmm. How did that work out? And how might humility screw up next?
Find out in Part 2 next week...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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