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This thread shows a phenomenon that I've noticed a lot of lately: that many smart people turn absolutely loopy when it comes to the topic of central banking. Th

This thread shows a phenomenon that I've noticed a lot of lately: that many smart people turn absolutely loopy when it comes to the topic of central banking. There's nothing quite like it, and I'm not sure how to explain it. The topic seems to make conspiracy theorists out of otherwise very reasonable people. Good to see the highest voted comments are sane, but the sanity ratio is pretty low compared to other topics.

spinchange 4y ago
A million times, this. You see extremely smart, rational, people start to attribute all kinds of personalized and emotional motives to things that are literally systemic, technical finance.
cf141q5325 4y ago
Could you give an example? Without this reads a lot like just calling people who dont share your narrative irrational conspiracy theorists. edit: On second read this sounded confrontational. I only ask because its really dangerous to make such broad non-refutable statements, especially when the conspiracy theorist label is used to no longer engage with people who dont share your narrative. Differently put, where exactly did you exit the conversation? Because thats really important information to realize if you are in an echo chamber.
- dereg 4y ago
  I agree with parent. There are so many. Here's a recent example where almost every comment in the thread is so off the mark as to be unrecognizable for the comments section of your local TV news station. https://news.ycombinator.com/item?id=33028673 https://news.ycombinator.com/item?id=33028673
  - christophilus 4y ago
    The top comments seem pretty reasonable there. Did you have a specific one in mind?
    - dereg 4y ago
      Basically every comment trying to make a political statement and those that are implying that investment managers made decisions out of greed and avarice.
      - christophilus 4y ago
        Agreed. That nonsense is tiring.
- doubleunplussed 4y ago
  Well, let's have a scroll... This one: https://news.ycombinator.com/item?id=33156617 https://news.ycombinator.com/item?id=33156617 No, the fed having negative equity doesn't stop them controlling the money supply. Unless like, they've literally sold all their assets and there's still too much money left in the system, but that's so far away from being a possibility that it's not worth considering. And even if it did happen, there would be options. Here we've got fed negative equity apparently resulting in revolutions, wars, and famines: https://news.ycombinator.com/item?id=33156855 https://news.ycombinator.com/item?id=33156855 Here we've got "don't be fooled, they just want profit and power": https://news.ycombinator.com/item?id=33156394 https://news.ycombinator.com/item?id=33156394 Here's a conspiratorially-toned objection to the whole concept of central banking, likening it to centrally-planned economies and implying it will be equally disastrous: https://news.ycombinator.com/item?id=33160065 https://news.ycombinator.com/item?id=33160065 > Differently put, where exactly did you exit the conversation? I'm still early on in my journey learning about economics (I'm a physicist turned software engineer), but after only learning a little bit it is pretty easy to spot the people who've learned almost nothing but confidently assert it's all a scam or whatever, and pretty much dismiss them. But walking away from them doesn't mean entering an echo chamber. There are plenty of legitimate objections to how central banking is done. For example, whenever central banks monetise government debt, they buy it via private investors who therefore get to skim a bit off the top. It doesn't really feel fair for these middlemen to make bank off the central bank deciding to fund the government's deficits, an interaction that need not involve them. On the other hand, keeping the central bank and the government at arm's length from each other is an excellent idea. So how best to balance this? It's starting to look like fiscal policy can be more powerful than monetary policy. How can we leverage this to stabilise the economy without handing the government too much power it might misuse? Should the target inflation rate be higher? Should we target a different metric, like, nominal GDP? Should the target be symmetric? Should it be level targeting or rate targeting? Can interest rates be negative? Is the zero lower bound an actual problem, or is more QE a fine and sensible response and we're just a little too scared of it? Should the Fed pay interest on excess reserves? Is a corridor system better than a floor system for rate targeting? How can we best deal with moral hazard? Even though I've got plenty yet to learn, it is extremely clear to me that some kind of control of the money supply is necessary, otherwise you get depressions. So I am not expecting to encounter much serious argument for getting rid of central banks entirely, unless someone invents a distributed way of achieving the same goal, or has a feasible plan for the government taking on the role instead of a central bank. If someone's got a serious argument, I'll hear it, but if it's from the "it's all a scam, we should never have left gold" crowd, I'm not expecting much. It's not a scam, it's a legitimate attempt to make a system that works, and it would be much worse if we were still on gold. Yet there seems to be something about the topic that draws otherwise smart people into dismissing the whole thing.
spaceman_2020 4y ago
Modern monetary theory is so complex and jargon-filled that the only way lay people can understand it is through conspiracy theories. Conspiracies offer succinct one-paragraph explanations (usually ready-fit for the group's biases) for extremely complex processes. In a way, it's like climate change. Extremely complex and hard to model, which invariably attracts conspiracy thinkers ready to whip it down into digestible quotes and ideas.
- roenxi 4y ago
  "lay people": It looks a lot like you're printing money and handing it out to your wealthy buddies. "experts": This matter is too complex and jargon-filled for you to take part in the debate. "lay people": Explain again why we have an institution that alternates between handouts to asset owners and crashing the economy? I think prices going up exponentially with time might be bad for my welfare! "experts": Those crazy conspiracy theorists! At it again. They can't even using the word inflation the way we defined it. ... There are complex things involved here, but a lot of it is pretty obviously bankers being confused at the idea that there are options other than taxpayers backstopping their obviously bad gambles. It looks like this round it might turn out pension fund style entities are the ones backing the whole show, I have my popcorn at hand if so and my pitchfork if it happens to be me. I don't want to pay for stuff that I never supported to start with. I don't want my taxes spent on foreign military expeditions either, I think that is actually bad for the economy.
  - pjc50 4y ago
    > printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going up exponentially with time might be bad for my welfare! And prices going down exponentially is bad for investment, and precisely keeping prices the same forever is impossible; that's why the target is 0-2% and central banks have been extraordinarily successful at meeting that target through interest rate adjustment. > pension fund style entities are the ones backing the whole show Pension funds are more or less obliged to buy the safest assets they can?
WastingMyTime89 4y ago
It’s funny. I would personally say many people who think of themselves as smart suddenly realise their limits when faced with monetary theory and prefer loopy theories to facing the truth. Alternatively, you could frame it less harshly with people who have very little economic background prefer loopy theories to actually engaging with the complexity of monetary theory.
- deleted 4y ago
  [deleted]
sedeki 4y ago
So where can I read up on how modern central banking actually works? Like, what book(s) or curriculum do I need to study? Genuine question.
- ShivShankaran 4y ago
  Khan academy has amazing videos. I have a financial domain expertise and i still watch their videos
- kypro 4y ago
  Central Banking 101 by Joseph J Wang is decent.
- satellite2 4y ago
  https://www.coursera.org/learn/money-banking https://www.coursera.org/learn/money-banking is an extroardinary introduction on what is actually money and how banking works (including the role of central banks)
blitzar 4y ago
Where you see such thinking on a subject you have some basic to reasonable knowledge of - if the comments you read on other subjects are similarly lacking.
oneoff786 4y ago
No, pretty much anything with an ideological spin has this effect. “Smartness” defined as the ability to compile arguments for things, is irrelevant when you take your position as a given and work backwards.
dapf 4y ago
mattbrewsbytes 4y ago
As are a lot of discussions here on HN with topics people aren't particularly knowledgeable about. You have to be decently smart to program computers to do things and that doesn't necessarily translate to other fields but because people feel so smart in one area they feel like they can problem solve other areas. I think dunning-kruger effect is the term but I'm not a psychologist so that could be wrong (ha!).
dragontamer 4y ago
Hasn't that always been true? Guilds and banks have been the center of conspiracy theories since their invention in the late dark ages. People are distrustful of money, especially of the people who seemingly create money out of nothingness. To someone who doesn't understand monetary instruments, it's all conspiracy theories to explain why those people have lots of money, while I myself do not.
dc-programmer 4y ago
I have two theories 1. Economic uncertainty causes stress. The economic system is complex beyond comprehension so folks reify their anxiety onto the physical manifestation of the economy - money. Thus the money supply, and by extension the Fed, become a synecdoche of a much larger system. 2. The Fed is a scapegoat for fiscal policy. Politicians and special interests peddle Fed conspiracies because it distracts from Congress’ dereliction of duty to make fiscal policy. Taxing and spending are powerful levers that many politicians are loathe to use. This is why the Fed Chair doesn’t even have to be an economist anymore. They are just a whipping boy for the public
SilasX 4y ago
These threads show a phenomenon I've noticed a lot lately. That many smart people suddenly flout HN guidelines[1] on a topic when they agree with the mainstream view. Rather than use their purported expertise to substantively refute the misconceptions, they give content-free remarks that amount to no more than "the bandwagon doesn't believe this, therefore you should feel low-status for believing it, therefore you are wrong". This topic seems to make intellectually-uncurious status seekers out of otherwise hacker-mentality people. [1] https://news.ycombinator.com/item?id=33153931 https://news.ycombinator.com/item?id=33153931
Bakary 4y ago
It's not just central banking, but any money-related topic that involves large institutional choices or new paradigms, such as the gold standard or bitcoin. I've noticed that there is a very recognizable tone of voice attributable to people who self-identify as intelligent and who chose to talk about monetary issues like these. The drive to appear intelligent and to distance yourself from the crowd is never as strong as it is in those discussions. The combination of money and power plus their physical manifestation in the form of a central bank or measure you can point to acts as a lightning rod for anxiety.
omgomgomgomg 4y ago
You cannot really blame them, it is natural to question absolute authorities and centralised power. And indeed, this is a place for tech people and devs who cant be experts in economy and banking. I worked in banks as well as dev, the banks are doing dirty things under a legal umbrella, dont think of them as saints, all the wealth they have came from somewhere. Now, a central bank, I am fine with that, it is important to keep the economy stable. They cannot always please everyone and they need to be politically independent, or not influenced. The politians understand that, most of the voter s do not. Imagine if every john doe had a say on a central banks SOPs
caeril 4y ago
For me, two things, neither of which is a conspiracy theory: 1. It's communism, for money. We live in a society in which prices for nearly everything: food, housing, laptops, etc, are all set my supply/demand equilibrium. The market finds a clearing price, and we pay it. We accept it, and we use a bit of regulation to handle edge cases in which market forces cause externalities and distortions. It works. But for some reason, we've decided that the price of money itself should be decided by a small Politburo. Why? 2. They're always wrong. Not only does the Politburo set the price of money independent of market forces, but they are incompetent. Dot plots one year off are consistently, and embarrassingly, wrong. Comments about "froth" during an obvious housing market collapse, or "transitory" to describe persistent, and growing inflation. These are 140 IQ people who have access to the best, and most timely economic data on the planet, but they are still dumber than the 94 IQ purchasing manager of a small feed supply company who knows within 5 seconds of glancing at corn harvest and transportation KPIs that there won't be anything even remotely "transitory" about inflation. It's bad enough having a Politburo dictate prices to us, but it's a whole other matter when the mantle adopted by these tinpot Philosopher Kings turns out to be nothing more than gross, and consistent, incompetence. My primary objection to central banking is that their existence is an affront to freedom, and that they are catastrophically bad at their jobs. You don't need New World Order conspiracies hatched in the woods wearing gargoyle masks and conducting Satanic rituals to know that this is a terrible idea.

spinchange 4y ago

A million times, this. You see extremely smart, rational, people start to attribute all kinds of personalized and emotional motives to things that are literally systemic, technical finance.

cf141q5325 4y ago

Could you give an example? Without this reads a lot like just calling people who dont share your narrative irrational conspiracy theorists. edit: On second read this sounded confrontational. I only ask because its really dangerous to make such broad non-refutable statements, especially when the conspiracy theorist label is used to no longer engage with people who dont share your narrative. Differently put, where exactly did you exit the conversation? Because thats really important information to realize if you are in an echo chamber.

dereg 4y ago
I agree with parent. There are so many. Here's a recent example where almost every comment in the thread is so off the mark as to be unrecognizable for the comments section of your local TV news station. https://news.ycombinator.com/item?id=33028673 https://news.ycombinator.com/item?id=33028673
- christophilus 4y ago
  The top comments seem pretty reasonable there. Did you have a specific one in mind?
  - dereg 4y ago
    Basically every comment trying to make a political statement and those that are implying that investment managers made decisions out of greed and avarice.
    - christophilus 4y ago
      Agreed. That nonsense is tiring.
doubleunplussed 4y ago
Well, let's have a scroll... This one: https://news.ycombinator.com/item?id=33156617 https://news.ycombinator.com/item?id=33156617 No, the fed having negative equity doesn't stop them controlling the money supply. Unless like, they've literally sold all their assets and there's still too much money left in the system, but that's so far away from being a possibility that it's not worth considering. And even if it did happen, there would be options. Here we've got fed negative equity apparently resulting in revolutions, wars, and famines: https://news.ycombinator.com/item?id=33156855 https://news.ycombinator.com/item?id=33156855 Here we've got "don't be fooled, they just want profit and power": https://news.ycombinator.com/item?id=33156394 https://news.ycombinator.com/item?id=33156394 Here's a conspiratorially-toned objection to the whole concept of central banking, likening it to centrally-planned economies and implying it will be equally disastrous: https://news.ycombinator.com/item?id=33160065 https://news.ycombinator.com/item?id=33160065 > Differently put, where exactly did you exit the conversation? I'm still early on in my journey learning about economics (I'm a physicist turned software engineer), but after only learning a little bit it is pretty easy to spot the people who've learned almost nothing but confidently assert it's all a scam or whatever, and pretty much dismiss them. But walking away from them doesn't mean entering an echo chamber. There are plenty of legitimate objections to how central banking is done. For example, whenever central banks monetise government debt, they buy it via private investors who therefore get to skim a bit off the top. It doesn't really feel fair for these middlemen to make bank off the central bank deciding to fund the government's deficits, an interaction that need not involve them. On the other hand, keeping the central bank and the government at arm's length from each other is an excellent idea. So how best to balance this? It's starting to look like fiscal policy can be more powerful than monetary policy. How can we leverage this to stabilise the economy without handing the government too much power it might misuse? Should the target inflation rate be higher? Should we target a different metric, like, nominal GDP? Should the target be symmetric? Should it be level targeting or rate targeting? Can interest rates be negative? Is the zero lower bound an actual problem, or is more QE a fine and sensible response and we're just a little too scared of it? Should the Fed pay interest on excess reserves? Is a corridor system better than a floor system for rate targeting? How can we best deal with moral hazard? Even though I've got plenty yet to learn, it is extremely clear to me that some kind of control of the money supply is necessary, otherwise you get depressions. So I am not expecting to encounter much serious argument for getting rid of central banks entirely, unless someone invents a distributed way of achieving the same goal, or has a feasible plan for the government taking on the role instead of a central bank. If someone's got a serious argument, I'll hear it, but if it's from the "it's all a scam, we should never have left gold" crowd, I'm not expecting much. It's not a scam, it's a legitimate attempt to make a system that works, and it would be much worse if we were still on gold. Yet there seems to be something about the topic that draws otherwise smart people into dismissing the whole thing.

spaceman_2020 4y ago

Modern monetary theory is so complex and jargon-filled that the only way lay people can understand it is through conspiracy theories. Conspiracies offer succinct one-paragraph explanations (usually ready-fit for the group's biases) for extremely complex processes. In a way, it's like climate change. Extremely complex and hard to model, which invariably attracts conspiracy thinkers ready to whip it down into digestible quotes and ideas.

roenxi 4y ago
"lay people": It looks a lot like you're printing money and handing it out to your wealthy buddies. "experts": This matter is too complex and jargon-filled for you to take part in the debate. "lay people": Explain again why we have an institution that alternates between handouts to asset owners and crashing the economy? I think prices going up exponentially with time might be bad for my welfare! "experts": Those crazy conspiracy theorists! At it again. They can't even using the word inflation the way we defined it. ... There are complex things involved here, but a lot of it is pretty obviously bankers being confused at the idea that there are options other than taxpayers backstopping their obviously bad gambles. It looks like this round it might turn out pension fund style entities are the ones backing the whole show, I have my popcorn at hand if so and my pitchfork if it happens to be me. I don't want to pay for stuff that I never supported to start with. I don't want my taxes spent on foreign military expeditions either, I think that is actually bad for the economy.
- pjc50 4y ago
  > printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going up exponentially with time might be bad for my welfare! And prices going down exponentially is bad for investment, and precisely keeping prices the same forever is impossible; that's why the target is 0-2% and central banks have been extraordinarily successful at meeting that target through interest rate adjustment. > pension fund style entities are the ones backing the whole show Pension funds are more or less obliged to buy the safest assets they can?

WastingMyTime89 4y ago

It’s funny. I would personally say many people who think of themselves as smart suddenly realise their limits when faced with monetary theory and prefer loopy theories to facing the truth. Alternatively, you could frame it less harshly with people who have very little economic background prefer loopy theories to actually engaging with the complexity of monetary theory.

deleted 4y ago
[deleted]

sedeki 4y ago

So where can I read up on how modern central banking actually works? Like, what book(s) or curriculum do I need to study? Genuine question.

ShivShankaran 4y ago
Khan academy has amazing videos. I have a financial domain expertise and i still watch their videos
kypro 4y ago
Central Banking 101 by Joseph J Wang is decent.
satellite2 4y ago
https://www.coursera.org/learn/money-banking https://www.coursera.org/learn/money-banking is an extroardinary introduction on what is actually money and how banking works (including the role of central banks)

blitzar 4y ago

Where you see such thinking on a subject you have some basic to reasonable knowledge of - if the comments you read on other subjects are similarly lacking.

oneoff786 4y ago

No, pretty much anything with an ideological spin has this effect. “Smartness” defined as the ability to compile arguments for things, is irrelevant when you take your position as a given and work backwards.

dapf 4y ago

mattbrewsbytes 4y ago

As are a lot of discussions here on HN with topics people aren't particularly knowledgeable about. You have to be decently smart to program computers to do things and that doesn't necessarily translate to other fields but because people feel so smart in one area they feel like they can problem solve other areas. I think dunning-kruger effect is the term but I'm not a psychologist so that could be wrong (ha!).

dragontamer 4y ago

Hasn't that always been true? Guilds and banks have been the center of conspiracy theories since their invention in the late dark ages. People are distrustful of money, especially of the people who seemingly create money out of nothingness. To someone who doesn't understand monetary instruments, it's all conspiracy theories to explain why those people have lots of money, while I myself do not.

dc-programmer 4y ago

I have two theories 1. Economic uncertainty causes stress. The economic system is complex beyond comprehension so folks reify their anxiety onto the physical manifestation of the economy - money. Thus the money supply, and by extension the Fed, become a synecdoche of a much larger system. 2. The Fed is a scapegoat for fiscal policy. Politicians and special interests peddle Fed conspiracies because it distracts from Congress’ dereliction of duty to make fiscal policy. Taxing and spending are powerful levers that many politicians are loathe to use. This is why the Fed Chair doesn’t even have to be an economist anymore. They are just a whipping boy for the public

SilasX 4y ago

These threads show a phenomenon I've noticed a lot lately. That many smart people suddenly flout HN guidelines[1] on a topic when they agree with the mainstream view. Rather than use their purported expertise to substantively refute the misconceptions, they give content-free remarks that amount to no more than "the bandwagon doesn't believe this, therefore you should feel low-status for believing it, therefore you are wrong". This topic seems to make intellectually-uncurious status seekers out of otherwise hacker-mentality people. [1] https://news.ycombinator.com/item?id=33153931 https://news.ycombinator.com/item?id=33153931

Bakary 4y ago

It's not just central banking, but any money-related topic that involves large institutional choices or new paradigms, such as the gold standard or bitcoin. I've noticed that there is a very recognizable tone of voice attributable to people who self-identify as intelligent and who chose to talk about monetary issues like these. The drive to appear intelligent and to distance yourself from the crowd is never as strong as it is in those discussions. The combination of money and power plus their physical manifestation in the form of a central bank or measure you can point to acts as a lightning rod for anxiety.

omgomgomgomg 4y ago

You cannot really blame them, it is natural to question absolute authorities and centralised power. And indeed, this is a place for tech people and devs who cant be experts in economy and banking. I worked in banks as well as dev, the banks are doing dirty things under a legal umbrella, dont think of them as saints, all the wealth they have came from somewhere. Now, a central bank, I am fine with that, it is important to keep the economy stable. They cannot always please everyone and they need to be politically independent, or not influenced. The politians understand that, most of the voter s do not. Imagine if every john doe had a say on a central banks SOPs

caeril 4y ago

For me, two things, neither of which is a conspiracy theory: 1. It's communism, for money. We live in a society in which prices for nearly everything: food, housing, laptops, etc, are all set my supply/demand equilibrium. The market finds a clearing price, and we pay it. We accept it, and we use a bit of regulation to handle edge cases in which market forces cause externalities and distortions. It works. But for some reason, we've decided that the price of money itself should be decided by a small Politburo. Why? 2. They're always wrong. Not only does the Politburo set the price of money independent of market forces, but they are incompetent. Dot plots one year off are consistently, and embarrassingly, wrong. Comments about "froth" during an obvious housing market collapse, or "transitory" to describe persistent, and growing inflation. These are 140 IQ people who have access to the best, and most timely economic data on the planet, but they are still dumber than the 94 IQ purchasing manager of a small feed supply company who knows within 5 seconds of glancing at corn harvest and transportation KPIs that there won't be anything even remotely "transitory" about inflation. It's bad enough having a Politburo dictate prices to us, but it's a whole other matter when the mantle adopted by these tinpot Philosopher Kings turns out to be nothing more than gross, and consistent, incompetence. My primary objection to central banking is that their existence is an affront to freedom, and that they are catastrophically bad at their jobs. You don't need New World Order conspiracies hatched in the woods wearing gargoyle masks and conducting Satanic rituals to know that this is a terrible idea.