Good morning, Quartz readers!
This week reminded us that central banks can still surprise. Markets soared when the Federal Reserve decided not to slow its stimulus to the US economy, and the Reserve Bank of India’s new head, Raghuram Rajan, took the limelight after raising rates sooner than expected to fight inflation.
To understand the power of central bankers, read Neil Irwin’s excellent The Alchemists. Remarkably gripping for a book about monetary policy, it relates how Fed chair Ben Bernanke, European Central Bank (ECB) head Jean-Claude Trichet and Bank of England (BoE) governor Mervyn King joined battle against the global financial crisis.
But Trichet and King are now gone, Bernanke has one foot out the door, and their successors face more diverse challenges. Rajan must stem the fall of the rupee. Haruhiko Kuroda in Japan is fighting entrenched deflation with a flood of cash. The BoE’s Mark Carney and the ECB’s Mario Draghi are looking for growth amidst rising debt. And Bernanke’s successor, probably Janet Yellen, will have to make the decision he postponed this week: When to let the US economy stand on its own two feet.
While no one would call saving the global financial system easy, it at least comes with a clear playbook, written by Walter Bagehot and Milton Friedman: Emergency loans to AIG and faltering European countries alike; low, if not zero, interest rates for years to come.
But sustainable growth is a more slippery problem. Should central bankers target nominal GDP, or issue specific guidance about unemployment and prices? How should they balance the conflicts between inflation and growth? How much should they track financial instability or seek to pop bubbles? How can they balance domestic needs with the impact of their choices on other countries? And can anything a central bank does succeed without complementary fiscal policy?
Bernanke, King and Trichet found a way to put out a fire. The new generation may find it harder to rebuild amidst the ashes.—Tim Fernholz
Five things on Quartz we especially liked
Fifteen decisions that can’t be made until Angela Merkel is re-elected. From another Greek bailout to EU tobacco restrictions, here’s a list of things in limbo until after Germany’s election on Sunday.
The ever-increasing reach of Google. While the company made a splash by announcing Calico, a new business tasked with finding out the most effective ways to extend people’s lives, it also reached the latest in a series of wind-farm deals that are quietly turning the electricity market on its head.
The paradoxical economics of Oktoberfest beer. It seems to be subject to a “Giffen paradox”—the more expensive it gets, the more people buy it.
The secret financial market only robots can see. Researchers have discovered thousands of micro-spikes and micro-crashes that have hit financial markets in the past few years, invisible to humans and regulators, and whose impacts on the markets are still poorly understood.
The latest fish we’re losing, thanks to trendy chefs. European seabass (a.k.a. branzino or loup de mer) took the place of cod and haddock on fancy restaurant menus as those species were overfished. Now it’s the seabass’s turn.
Five things elsewhere that made us smarter
NASA’s plutonium emergency. Deep space probes and robots like the Mars rovers need incredibly long-lived batteries. The only fuel that fits the bill is plutonium-238. It’s a product of the nuclear arms race, and the world’s supply is about to run out. Dave Mosher in Wired looks at the efforts to rekindle the production process.
Your iPhone pays for child soldiers. Like “conflict diamonds”, many of the rare metals in electronic devices come from mines in Congo that bankroll brutal civil war. Jeffrey Gettleman visited Congo for National Geographic and found that attempts to clean up the industry have had only limited success.
How power really works in Russia. Vladimir Putin may seem like an all-powerful tsar, but as political scientist Alena Ledeneva explains, he is merely a key player in what Russians call sistema, the system—an informal network of alliances and factions which both limits the president’s power and stymies any attempt at reform.
How Facebook fuels gang wars. You’ll learn more than you ever expected to know about both gang warfare and social media from Ben Austen’s long report in Wired on the lethal interaction between the online world and the mean streets of Chicago.
How Apple thinks about innovation. Sam Grobart in BusinessWeek puts the claim that Apple’s lost its innovative edge to the company’s top minds. Apple’s response is probably best summed up in one exec’s quote: “New? New is easy. Right is hard.”
Our best wishes for a relaxing and thought-filled weekend. Please send any news, comments, seabass recipes, and spare plutonium to email@example.com. You can follow us on Twitter here for updates during the day.