How are Central Bankers and Policymakers Losing Control of the Global Economy?

Key Takeaways:

  • With inflations soaring from the roof, Central Banks could be losing control of the economy
  • According to reports, the Consumer Price Index in the USA rose to 8.5%
  • The emerging cryptocurrency and blockchain industry is posing a threat to Central Banks globally
How Central Bankers and Policymakers are Losing Control of the Global Economy
Central Banks are losing control of the economy as inflation continues to be on the rise. Credit: Images Money via Flickr

YEREVAN (CoinChapter.com) – The Central Banks are in a difficult position. Policymakers and experts have accused them of being too slow to react to changes in the economy, which has led to inflation and unemployment. As a result, people are losing trust in them. Central Banks have an important role to regulate the economy and are designated to set monetary policy, maintain financial stability, and be responsible for issuing currency. However, while the world grapples with economic problems, their roles are globally challenged by the emerging blockchain and cryptocurrency industry. This has led experts to wonder if the Central Banks are losing control of the economy.

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Central Banks fail to fight inflation

One of the biggest indicators of the failure of Central Banks is the continued growth of inflation. In the United States, the Consumer Price Index (CPI) for March was 8.5%, higher than the market estimate of 8.4%. Just a month earlier in February, it rose to 7.9%. This marks the fastest pace of annual inflation in 40 years.

The CPI measures the average changes in prices that customers pay for goods and services.

Meanwhile, prices for goods and services in the eurozone surged to an all-time high in March. According to the European Union’s statistics office Eurostat, the year-on-year inflation rate for consumer prices reached 7.4%. The organization had earlier estimated that number to be 7.5%, a further indication of the total failure of Central Banks to manage the economy.

While it marks a slight relief, it remains far above the 2% rate that the European Central Bank’s (ECB) policy considered its optimal target. However, in what comes as more bad news for Europe, experts expect the inflation in Europe to only increase, owing to the ongoing war in Ukraine. 

The primary inflationary factor remains the massively rising energy cost. According to reports, energy prices rose 44% in March. Sanctions on Russia for its invasion have rendered the economic zone without any immediate alternatives for Russian oil and gas.

The harsh lockdowns in China owing to the rising Covid-19 cases have also delivered a huge blow to the global economy.

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Asia suffers from inflation as Sri Lanka defaults on debt

Inflations in Asia don’t paint a better picture for Central Banks The annual inflation rate in India increased to 6.95% in March of 2022, above market forecasts of 6.35%. In an embarrassing move, the Reserve Bank of India (RBI), the country’s central bank, revised its inflation forecast to 5.7% for the ongoing financial year. In February, it had projected a forecast of just 4.5%. 

This comes after the RBI underplayed the inflation in the country and constantly refused to acknowledge it. According to local laws, if the RBI fails to achieve its inflation target for three consecutive quarters, it would be termed a failure on its part. However, the Indian Government has continued to sweep the Central Bank’s failures under the carpet. 

As it stands, the Central Bank is losing control of the economy in India and the Indian Government remains complicit. 

Central Banks are losing control of the economy, How are Central Bankers and Policymakers Losing Control of the Global Economy?
Turkey’s Inflation Chart. Credit: Focus Economics

Turkey, another Asian giant hit with inflation, is sinking under massive financial burdens. Despite removing four Central Bank Governors since 2016, President Recep Tayyip Erdoğan has failed to contain the economic meltdown in his country.

Inflation in the country reached 61% in March 2022, an increase from 54.4% in February. Experts expect this number to reach 67% by May-June.

In Sri Lanka, the Governor of the country’s Central Bank stepped down as the island nation continues to go through its worst economic crisis in 70 years. According to the Department of Census and Statistics, Sri Lanka’s overall inflation was 21.5% in March 2022. As a result, the country defaulted on its $51 billion foreign debt earlier this month and has appealed to the International Monetary Fund (IMF) for a bailout.

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Can cryptocurrencies kill Central Banks?

The traditional banking system, led by Central Banks, faces tough competition from the emerging blockchain technology. One of the major reasons banks survive is because citizens trust them with their hard-earned money. But what happens once people stop giving banks any money?

There are other roles that Central Banks play, like issuing legal tenders and maintaining foreign reserves. However, citizens are looking for alternatives for faster and cheaper transactions with better returns on their assets.

One such alternative is the cryptocurrency startup Celsius Network. The blockchain-hosted platform pays up to 8% on Bitcoin (BTC), as high as 7% on Ether (ETH), and 11% on Tether. It also offers18% Synthetix (SNX). Investors get the higher rates if they accept yields in the platform’s native token, the CEL

According to CEO Alex Mashinsky, banks are refusing to pay out interest although they can afford to. 

“How can it be, that banks make record profits, and interest rates paid to us is zero?…They can afford to pay half of that. Why aren’t they giving you any money? ” 

the blockchain expert asked during a Propelify event. 

AQRU is another crypto interest platform that pays up to 12% annual interest. Customers can deposit fiat currency and earn higher interest rates in cryptocurrencies than most banks offer.

People have started taking control of their financial situations and decentralized platforms may put the Central Banks out to dry. Meanwhile, the Central Banks are losing control of the economy and are trying to catch up by issuing Central Bank Digital Currencies (CBDC). 

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Central Banks are losing control of the economy, How are Central Bankers and Policymakers Losing Control of the Global Economy?

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