‘ECB and Fed are not in touch with the real world’

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The whiz kids at the Federal Reserve and the ECB are too far from the common man to defend his interests. That says economist Danielle DiMartino Booth, who is today a guest at an event of the organization Leergeld.eu.

‘Who should be the successor of Mario Draghi at the ECB?’ Danielle DiMartino Booth does not venture to names.‘Someone with integrity, who keeps the interest of all Europeans in mind.’

According to her, the current President of the European Central Bank does not comply with that description. DiMartino Booth is a fierce opponent of the loose monetary policy of both the American Central Bank (the Fed ) and the ECB.Today she speaks at an event organized by Leergeld.eu, the initiative of N-VA MEP Sander Loones.

DiMartino Booth worked nine years for the Dallas Fed, one of the central banks that together form the Federal Reserve. About that experience, she wrote last year the book “Fed Up – An insider’s take on why the Federal Reserve is bad for America.” In it, the former journalist describes how the hundreds of academics at the bank’s studies mainly rely on theories and models to outline monetary policy. QE – the large-scale printing of money – is, in her view, the result of too academic an approach to the policy. The negative consequences are not adequately faced.

‘In Europe it is even worse than in the US. Here the central bank has even diverted to negative interest rates. It has never happened to us. The Fed stopped at zero percent. “ Much ink has already flowed about the effects of QE and the negative interest rate. Life insurers and pension funds have difficulty meeting their obligations. Savers hardly receive interest and invest their money in real estate and shares whose price is artificially inflated. ‘And the problem with artificially low interest rates is also that companies that are no longer creditworthy are still kept artificially alive. That does not accelerate economic growth, it just puts a brake on it ‘.

Yet there are many studies that show that although there are negative consequences, they do not outweigh the positive ones. The economy would be worse off without the doping of the ECB than is currently the case, say most economists.‘It is complex’, DiMartino admits. “If the house is on fire, you have to extinguish. But it is a question of the law of diminishing returns. The more money you print, the less impact each euro or dollar has. And that’s how you work yourself in a situation that is difficult for you. Have you seen the figures of German growth? It has been halved! ‘

Too much theory

DiMartino Booth worked at the Dallas Fed under Richard Fisher, who was not a big supporter of QE. According to her, Fisher looked more at the practice he saw around him than at the models and theories of academics and professors.Central banks, both in the US and in Europe, need that kind of people, she says. ‘There is not enough intellectual diversity in the top of the central banks. I have noticed that there is a kind of group thinking that is very difficult to break. Even Mark Carney ( governor of the Bank of England, ed .) Is not the rebel I saw in him. In India they chose an independent thinker ( Raghuram Rajan , red ), but that did not last long. “

DiMartino Booth also notes that central bankers have more power than ever. ‘If you look at the balance of power between central banks and politicians, there is a clear imbalance . The Congress did not even manage to order a screening from the Fed “ The screening was also an initiative of the Republican Ron Paul, who is openly wondering whether central banks are necessary. DiMartino Booth does not want to go that far.

‘We need an independent central bank. But the politicians have to do their job. They are competent for the appointments. In that way they can bring in more people with a sense of what is happening in the real world. ‘