Ivo Arnold, Professor of Monetary Economics at Erasmus School of Economics has criticised statements made by George Möller, in an opinion piece in the Financieel Dagblad. Möller questioned the credibility of De Nederlandsche Bank’s (DNB) supervisory function.
Recently, Möller has been spreading panic about DNB’s balance sheet. Arnold, however, calls this nonsense and counterproductive. According to him, the central bank should not be seen as a normal bank. After the fall of commercial banks, critics say it would now be the central banks' turn. Arnold, however, says a central bank can function just fine with negative equity. Since the central bank has a monopoly on money issuance, they can always meet their obligations and solvency is therefore non-lethal. A central banker's purpose should be to be a public servant with political mandate. Therefore its goal is to maintain price stability, not to maximise profits. This is why the credibility of the central bank lies in its ability to create that stability, not in its existing assets.
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You can download the full article from het Financieel Dagblad, 8 March 2024, above.
