DAVOS, Switzerland (CNNfn) - A panel of top bankers from across the world debunked the theory that central banks are gradually losing their influence over economic activity Friday, although some suggested a consolidation of currency or even central banks might become necessary.
Although some have suggested the advent of e-banking and the move toward a cashless society might ultimately phase out the central banks that currently control monetary pricing and flow around the world, the people making those decisions say their influence remains as strong as ever.
"The rumors of our demise, at least in the United States, are greatly exaggerated," said Joe Ferguson, vice chairman of the U.S. Federal Reserve Board, who added the theory that his board will somehow lose its influence over monetary policy was "not the kind of thing that keep me up at night."
Jacob Frenkel, governor of the Bank of Israel, said the role of central banks has actually grown more important as financial markets have demanded more transparent information.
"The fact is that the very role of central banks is to ensure price stability and, in recent years, ensure financial stability," he said. "The very reason that you needed them before are still here. So, if we want to have a transparent system, we need to have a strong central bank."
However, Frenkel carried his argument a step further, saying he ultimately believed world monetary systems would move toward having fewer currencies and possibly as few as two or three central banks worldwide.
"By and large, we are going to end up with very few central banks, at the extreme one," he said. "We are also going to have few currencies and I would not be surprised if we end up with two or three."
But to accomplish such a system, Frenkel said local governments must overcome geographical biases and instead concentrate on what monetary "concepts" work best for their specific countries.
Ferguson and the other panelists declined to comment on the record about a possible move toward fewer central banks and currencies.
Frenkel's comments come as the euro dipped to new lows Friday in European trading against the dollar, trading below its low levels of the day in New York trading Thursday.
But economists attending the World Economic Forum in Davos generally have downplayed rumors of the euro's apparent demise, and continue to express confidence that the new currency for Europe will turn around, eventually.
"I think it will remain relatively stable," said Victor Halberstadt, professor of public economics at Leiden University in the Netherlands. "It's not a concern of the European right now." 
|
