The central banks have already been transformed into the cleaning lady who tidies up after the party thrown by the governments and states but which they didn't pay for, chief economist of the National Bank of Romania (BNR) Valentin Lazea told a specialist video conference on Tuesday.
"The central banks have already been turned into the cleaning lady who tidies up after the party of the governments and states. And this role will grow, in the sense that not only will interest rates stay below the inflation rate for a long time, maybe even decades from now on. If French fable writer La Fontaine lived today he would have to note how badass the merry-making grasshopper is and what a sucker the purse-tightening ant is. Ask 99 percent of the world's economists and they will tell you it's better to be a grasshopper, not an ant," Lazea said.
The BNR chief economist said that a negative effect will be that as the central banks buy government debt directly from the primary market, they will end up holding increasingly larger chunks of the economy, which will generate a populist wave that will challenge the power of the central bankers.
"At some point, the governments will end up owning the economy, because they will have to buy, to nationalize large parts of the economy, and that wouldn't even be the worst thing. The worst thing is that as they buy government debt directly from the primary market, as it seems to happen, the central banks will end up owning increasingly larger parts of the economy. In other words, the maid or Cinderella will become the queen. It's not an enviable situation, because the moment the queen holds large chunks of the economy, a populist wave will erupt everywhere, questioning the power of the central bankers and forgetting that the cleaning lady has practically tidied up after a party nobody has paid for," the BNR official said.
Representatives of the financial-banking milieu and of the capital market participated on Tuesday in 'The Post-Pandemic World' video conference organized by the Bursa Press Group.