Central banks

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Richard A Werner talks about how central banks works. He don´t touch the owner issue. But he makes some interesting  insight  how the central bank works.

He got´s some interesting points  regarding the asset bubble boom  in Ireland (something that might interest Ognir) that occurred simultaneously  as a  recession in Germany, despite the fact that they had the same interest rate (set by ECB). The key point is that the interest don´t effect the money supply – it.s the other way around – the money supply effect the interest – so the central bank are not driven by the money supply and raise or lower the interest as a respond to that increase or decrease – it´s the other way around – the central bank is in the drivers seat and the interest is a secondary action (but the central bank portraits that the causality  is the opposite in other to look as they don´t have any power). I think we all know this on this forum but it´s nice when a professor explains it in a straight manner.

I also recommend reading his book  "Princes of the Yen". It gives some very good insights to how the central banks works – even though he doesn't touch the "you now who" question more then hinting it. Perhaps he´s extra cautious since he¨s from Germany – I don´t know – but it´s good reading.

[youtube:2vt1xpf2]http://www.youtube.com/watch?v=qfX_rNOeTXw[/youtube]2vt1xpf2]
[youtube:2vt1xpf2]http://www.youtube.com/watch?v=dortdhx9WFs[/youtube]2vt1xpf2]