Hi MF,

Thx for your comments! Don't presume that this is strictly about intelligence. Understanding intelligence is a whole field of inquiry unto itself, which I don't have the space to get into here. Yes, central bankers are smart people, but this isn't so much about intelligence as beliefs. I don't think you should presume that central bankers automatically have the public's best interest in mind. I think they have the government's interest in mind and may or may not have the public's interest in mind.

All it takes for someone to choose a wrong [intellectual] path is holding onto a set of beliefs that are faulty in some way. My personal view of central bankers is a combination of the following: over-statement of what they can control (cognitive problem); belief that their models of the economy are complete (micro-macro bias); arrogance that they can choose what is best for people (emotional problem) better than the people themselves as expressed through the market (comprised of billions of choices by millions of people); agency costs (my gain, your pain), and diffusion of cause and effect (Newton's second law applies to economics - for every action, there is an equal and opposite reaction. However in markets, a single action by the central bank [to raise interest rates, or reduce the money supply, or by long dated bonds, etc.] creates a diffuse reaction leaving consequences for millions of different people and institutions - some of whom benefit and some of whom are harmed.) As a result, the relationship between cause and effect can be opaque.

Of these, perhaps the most insidious is that central bankers, academics and politicians all share the same fringe benefit that they personally do not pay the costs of being wrong. The public at large does. Look at the US inflation of the 1970's, Nixon's getting off the gold standard in his attempts to support his re-election in 1972, the Austrian hyperinflation of 1920's, etc., etc.. Central banks' very existence supports the power of government, and if it ends poorly, which this likely will, the central bankers, the academics and the politicians will likely escape blame. Just as they have so many times before.