Central banking’s secret market rigging, not its credibility, controls price expectations, by Chris Powell, a critic of the secretive and murky world of central banking.

The general manager of the Bank for International Settlements [BIS], Agustin Carstens, at a conference in Stockholm celebrating the 350th anniversary of Sveriges Riksbank, the Swedish central bank. …

Historically, fiat money was at best a temporary war expedient and at worst a breach of trust. Today, institutional credibility grounds price expectations, not gold.

But if price expectations have become entirely matters of confidence in central banks and are no longer connected with gold, why has the Bank for International Settlements been trading gold and gold derivatives so frantically on behalf of its member central banks for the last two years? …

In 2005 another BIS official — William R. White, then the director of the bank’s monetary and economic department — spoke at a conference at BIS headquarters in Basle, Switzerland, and revealed the main objective of “central bank cooperation.” White said it was simply market rigging. He described it as “the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful” …

Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest — to benefit especially the financial interests, the banking and investment banking industries.

These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.And so we have come to an era of daily market interventions by central banks — so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.

Central banking controls the value of all labor, services, and real goods, and yet it is conducted almost entirely in secret — because, in choosing winners and losers in the economy, advancing infinite amounts of money to some participants in the markets but not to others, administering the ultimate patronage, central banking cannot survive scrutiny.

Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.