Central bankers have been prosecuted in the press lately. Prevailing rates of inflation are multiples higher than their targets. And so they have turned to a trusted way of escaping any form of accountability for it. It’s called the Asoh Defence. And today, as your prosecutor in the court of public opinion, I intend to rip their defence to shreds.
But, first of all, what is the Asoh Defence?
You might think that missing the runway by a mile is unforgivable. But not so for Captain Asoh of Japan Airlines Flight 2 to San Francisco, who executed a perfect water landing in the San Francisco Bay in 1968.
What made Asoh’s subsequent defence of his actions so palatable was simple. Nobody got hurt, apart from a kid with a bloody nose.
The rescue operation went so well that nobody even got wet. And the captain went back to the plane to get people’s belongings once they were safely on shore.
Conveniently, the plane happened to land in the one place that was shallow enough to avoid a real debacle.
Not only was the plane itself not a hull loss (to borrow a phrase from the insurance industry) but it was actually back in the air within a year. Meanwhile, the Japan Expo received a lot of free publicity because of its advertising on the plane’s fuselage.
Now, Asoh had some excuses that he could’ve made. His co-pilot didn’t speak Japanese (that’s how Japanese explain their lack of English). The fog was unusually bad and low that day. And he was relying on some sort of new technology-based landing system for the first time.
But Asoh didn’t appeal to those reasons when he was called on to explain himself. He simply accepted responsibility so blatantly that the legend of the Asoh Defence was born. He told everyone that he’d “f**ked up” and that was the end of it.
This sudden knowledge of English begged the question about how much of a language barrier there really was with his co-pilot. But, that aside, the point of the Asoh Defence is that it’s difficult to argue with someone who admits human error and does so graciously.
As a result, Asoh was merely demoted to co-pilot and was back in the air soon enough. False stories of his ritual suicide have been circling since, probably because of the horrific abuse of the Asoh Defence by far less deserving people since.
More recently, the Asoh Defence has been misused by central bankers.
The best example of the monetary meddlers who have attempted to make the Asoh Defence comes from Reserve Bank of Australia (RBA) governor, Dr Philip Lowe, who made the following apology:
“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in.”
This refers to the promise from the RBA – Australia’s central bank – that inflation and interest rates would remain low until 2024.
In the recent past, other central bankers have also come mighty close to verbatim repeats of the Asoh Defence. It’s wonderful to see some humility from them.
But don’t fall for it.
Here’s why…
Before and during their admissions of human error, central bankers have appealed to every excuse in the book: indeed, some have taken a few from my daughters’ worst moments too.
If Asoh had claimed that San Francisco Bay had “pretty much come about from nowhere,” as European Central Bank (ECB) president Christine Lagarde did of inflation, it would’ve made his blunt admission a little less endearing. The exact altitude of the surface of the sea is, after all, very widely known.
Asoh also accepted the blame for causing the actual error. Central bankers have not done so. They still don’t seem to know what’s causing inflation, only making a few vague references to all sorts of possible causes.
Central bankers have blamed the fog of war for inflation, just as unusually bad fog obscured Asoh’s view of where he was flying 96 passengers and 11 crew. What mystifies me is that fog is not invisible, ironically enough, and so both Asoh and central bankers could’ve done something about it. But they didn’t. And yet, only Asoh seems to have admitted this was a mistake. The crash was attributed entirely to his mistake, and not to some other cause.
Asoh, it’s worth remembering, hadn’t made any promises to his passengers about how he would navigate his plane to San Francisco. If the weather was too bad, or if a malfunction took place, he would’ve been right to look for alternatives – as he should have done.
Compare this to central bankers, who made prognostications and promises about how inflation and interest rates would remain low. People relied on those promises, which central bankers had no right, ability or competence to give.
Once the inflation emerged and Japan Airlines flight “landed”, the behaviour of central bankers and Captain Asoh could not have differed more. Central bankers claimed for months that the inflation was “transitory”. Imagine if Asoh had told his passengers not to worry about landing in San Francisco Bay, and that their delay in getting to San Francisco airport would be “transitory”, instead of executing an impressively competent rescue manoeuvre.
While Asoh helped get people and their belongings off the plane and to safety, central bankers have been busy punishing those who were gullible enough to believe that central bankers knew what they were doing. Rate hikes are decimating standards of living – and they’re designed to.
Asoh didn’t charge his passengers more for his mistake, as far as I know. Central bankers have done exactly that.
Asoh was reportedly the last one off the plane. Central bankers at the ECB and the Bank of England are demanding their wages are increased with inflation while also demanding that other people’s wages are not, for fear of a wage-price spiral. That is not to mention the bonuses that staffers at the Bank of England have been paid while inflation goes bananas.
Perhaps worst of all, central bankers continued to stimulate inflation via quantitative easing (QE – the expansion of the money supply in order to buy bonds) and low interest rates even as inflation took off. Some would say they’re still boosting inflation: this is because official interest rates are still below the prevailing rates of inflation or are, to put it technically, negative in real terms.
Asoh decided to execute an impressive ditch operation once he saw the metaphorical writing on the water. Imagine if he had refused to believe he was wrong in the face of San Francisco Bay and nosedived instead…
Last but not least, I accuse the defendants of a conspiracy. I doubt Asoh landed in San Francisco Bay in order to get free advertising for the Japan Expo. But I suspect central bankers have deliberately engineered inflation. Perhaps they got a little more than they were hoping for, but it was deliberate nonetheless.
This nullifies their ability to use the Asoh Defence.
Why would central bankers humiliate themselves in such a way? The explanation for all human action in economics is always, “because the alternative is worse”. Economists call this “opportunity cost” to make it a bit more ambiguous.
You see, central bankers generally have two mandates, however they might couch them officially. However, maintenance of financial stability and preservation of low inflation aren’t always congruent. Sometimes you need to have a little inflation to avoid financial instability. That is often true when there is too much debt in the system – as there is now.
The easiest way out of this situation is to allow a bout of inflation to reduce the debt burden. The £10,000 mortgages of the past seem easy to repay because of inflation over time. The same inflation again would make today’s £200,000 mortgages easy to repay in the future too.
So, when central bankers attempt the Asoh Defence after allowing inflation to get out of control, consider whether this wasn’t what they wanted all along. They’re helping their buddies in government pay off their debts in funny money.
I’ll finish with a simple question. Which plane would you rather be on? One with Captain Asoh at the joystick, or one full of central bankers on their way to a conference?
Me? As the prosecutor representing you in the court of public opinion, I’d choose a combination of the two…
Nick Hubble
Editor, Fortune & Freedom
