Why the central bank club is bad for you

Christine Lagarde

Who are the global financial elite?

A good working definition is: a small group of very powerful people who hold a disproportionate amount of wealth, privilege and influence.

The term also implies mystique about secret societies that control the ‘system’, etc. Conspiracy theories abound, yet are hard to prove.

Today, though, I want to examine one area where the global financial elite exercise very obvious power over us. I call it the central bank club…


You may have noticed that Christine Lagarde has just been nominated by the European Council as the next president of the European Central Bank (ECB). She succeeds Mario Draghi, whose eight-year term finishes in October.

Those that haven’t seen this may be asking: who’s Christine Lagarde?

Answer: she’s been the head of the International Monetary Fund (IMF) for eight years (exactly to the day, in fact). To be precise, she’s not a central banker as such. But as one of the global financial elite, she is an honorary member of the club.

Having started her career as a lawyer, Largarde is a former French politician who served in three different posts in the French government between 2005 and 2011.

There’s been a bit of scandal along the way, too.

In August 2011, the French authorities investigated Lagarde’s role in a €403m arbitration deal in favour of businessman Bernard Tapie. Her Paris apartment was raided by police as part of the probe. To cut a long story short, in December 2016 a French court found Lagarde guilty of negligence. But it declined to impose a penalty.

Whaddayaknow? This would have torpedoed most people’s careers. But not our Christine! She’d already become part of the global financial elite. She retained her IMF job, no bother.

I’ll not comment any more on the Tapie case because I’m only aware of publically-available information. In addition, this isn’t a character assassination. I reckon the whole system is, err, questionable… at the very best.

Let’s take a closer look at who’s headed up the IMF since it started soon after WWII.

Over that timeframe there have been 11 Managing Directors. Six of those, including Ms Lagarde, have been French, with the other five all being Europeans (though no Brits, by the way – we’ll come to this in a minute).

The IMF’s history hardly demonstrates real diversity and worldwide inclusivity.


Apparently, though, this is tradition. There’s a “long-standing ‘gentlemen’s agreement’ under which the IMF managing director is a European and the World Bank president is an American”: that’s a quote from Joshua Keating in FP Explainer at around the time Christine Lagarde was appointed. Not only has this ‘agreement’ remained in place since then, it doesn’t look like an impending change is on the horizon.

Bank of England boss Mark Carney has been quoted as favourite by Betway to replace Ms Lagarde at the IMF, according to Bloomberg this week.

That would, of course, be yet another cosy central bank club appointment.

OK, technically Carney is Canadian. But Threadneedle Street in the City of London is where he’s really earned his spurs since becoming BoE boss in 2013. What’s more, via his grandparents, he possesses an Irish passport. He also took British citizenship in 2018. So he’s become a ‘de facto’ European (until Brexit finally happens, anyway).

Since that Bloomberg piece, though, Betway’s odds have changed. The new favourite for the IMF post is none other than George Osbourne, ex-UK Chancellor of the Exchequer and presently Evening Standard editor. At the time of writing, he’s quoted at just 5/2 – that’s a near-30% chance – for the job.

Bearing in mind the IMF’s track record, at least an Osbourne nomination would be breaking the mould by installing a Brit (just saying, not passing comment!) And as he apparently gets on well with Christine Lagarde, I’m sure she’ll put in a good word for him. But this would be yet another example of the global financial elite looking after their own.

Even then, it wouldn’t be the most obvious example of central bank club cosiness. Also in the running for the IMF role is the current ECB boss Mario Draghi.

Yes, that would be a straightforward job swap with Lagarde. The world’s financial elite would be clapping their hands with glee. In their view, the ‘system’ would remain in safe hands.

The real problem

And here’s my beef with all this self-congratulatory central bank club cronyism.

No doubt all the names that I’ve listed today can claim that they’ve done a wonderful job in times of economic and financial turmoil. Such as ‘sorting out’ the mess caused by the cataclysmic events of a decade ago.

But the real issue here is that the root cause of the 2007-2009 Great Financial Crisis (GFC) – huge bad debts – was created by central bank strategies in the first place.

So passing the parcel, jobwise, amongst the global financial elite doesn’t do it for me.

Subsequent schemes such as quantitative easing (i.e. debt monetisation/bond yield suppression) haven’t repaired the world economy. They’ve made the rich much richer while those of us who’re trying to generate a decent return from our savings are being clobbered by artificially low interest rates.

I’d like to see some fresh faces with new ideas, e.g. from emerging economies, leading the world’s major financial institutions. In particular, candidates whose solution to every problem isn’t simply ‘let’s print more money’.

That’s unlikely to happen, though. The self-perpetuating central bank club containing only ‘group-think’ globalists is set to keep holding sway. Via ongoing loose monetary policies, it’s now encouraging a much larger worldwide borrowing build-up than it did a decade ago.

The big risk here is a potential repeat of the GFC. But if that transpires, the central bank club response is likely to comprise the same old discredited methods as before. Which could make things a great deal worse for those outside the financial elites…

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