Is China’s central bank beginning to believe its own lies?

The People’s Bank of China is reluctant to further reduce the required reserve ratio for fear of such a move resulting in the weakening of the yuan, according to a leaked document.

SCMP, January 25

I do not decry the occasional little piece of official deceit. After all, even the Ten Commandments do not say, “Thou shalt not lie.” They only say, “Thou shalt not bear false witness against thy neighbour.”

Central banks certainly find it useful to tell little white fibs from time to time. They worry that a public loss of confidence in the financial system can feed on itself and make things worse. They therefore like to make soothing noises to forestall misfortune. This constitutes bearing false witness to thy neighbour, not against him. I can’t get worked up about it.

Thus I think it entirely understandable that the PBOC should tell us just now that everything is fine and under control under the guiding hand of President Xi Jinping, even if everything is not actually fine and under control, which is more likely to be the case. I expect this from a central bank.

READ MORE: PBOC monetary management just official rigging of the exchange rate

But what I do not understand is why central bankers should wish to deceive themselves as well as the general public. Yet this seems to be the case at the moment. The PBOC believes its own lies.