For those who believe that government officials can do magic, this should be a reality check.
Here is a list of major recent failures of central bank interventionism which Fortune’s Colin Barr commented as having “caused a kerfuffle, much to their citizens' dismay.”
From Mr. Colin Barr:
The Bank of Switzerland. It spent around $200 billion between March 2009 and this past June in a bid to hold down the Swiss franc's appreciation against the euro. How did that work out? The swissie appreciated 10% during that span anyway. "Those are some serious paper losses," said Popplewell. "You'd have to say their big picture strategy hasn't worked out."
The Bank of Japan. It has spent almost $800 billion since 1977 on currency intervention that "seems to have had little lasting effect" on the value of the yen, a 2007 report to Congress concluded. But try try again. And so it is that this month Japan intervened for the first time in six years in a move that was almost universally derided as doomed to fail – particularly since any Fed announcement of QE2-related action would likely send the dollar lower against all currencies.
The Central Bank of Brazil. It has wasted large sums in a forlorn bid to hold down the value of the real over the past year. But setting an example all central bankers are surely taking note of, Finance Minister Guido Mantega said last week the government won't let that stop it from making the same mistake over and over again. "We won't just stand here and watch this game," he said. But the moral of this story might be: Don't just do something, stand there.
Bottom line: Governments recklessly gamble away with OUR money yet FAIL to accomplish the intended goals!
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