Jens Weidman is the top man in Germany's Bundesbank and according to the FT editorial on 24 January Weidmann's doubts he is worried about central banks losing independence. He sees battles in Japan over who controls monetary policy: government or central bank? In an article Chris Giles spells out the issues around The Fed, the BoJ, the ECB and the BoE. The first and last have an operational independence to meet a government-set target and the middle two have absolute independence to set their own monetary policy target and meet it.
The FT editorial is wary of politicians steering monetary policy (as UK 1970's & 80's) and messing up with high inflation. But here is an interesting phrase from the FT leader writer:
'Democratically elected governments still have a role to play. They have the right to choose* a governor whose preferences regarding inflation are broadly consistent with their own. In some countries, such as the UK, politicians also set the central bank's objectives.'
That's OK then. We are to be allowed a little bit of democracy as far as the awesome power of central banks is concerned. But how have these current systems worked out?
[* Democratic element for the choice of the new BoE governor limited to a hurried interview and then leave it all up to Mark Carney's good judgement that the unfolding 'set objectives' arrive before the end of his 5 year term?]
Sir Mervyn King of the UK's BoE clearly admits that he failed to warn years back, about approaching dangers. See this blog 13 August 2012 The awesome power of central banks .
He, in Chris Giles' words, (Why Sir Mervyn has taken a walk on the supply side)
'has done a four year volte-face by admitting that the pre-crisis period was infected by unsustainable overexposed bank lending and unsustainable paths of consumption'.
So whatever the balance of independence, when the person placed to be the country's bank supremo can get it so wrong - and hats off to Sir Mervyn for his sackcloth and ashes admissions - the current system is clearly broken and wonky, with nasty noises in the back axle as it approaches Basel and unresponsive steering too. What more does the awesome, street facade of the Bank of England signify now, than just a studwork-and-plaster film set, signifying grandeur but hopelessly exposed as not fit for purpose for the real world? Help! It's our lives that they are playing with as they try and pretend the machine just needs an odd new committee bolted on here and a couple of safe banking ratios there, to fix it.
Here is good sense from a quite different monetary policy reform, proposed by Huber and Roberston in Creating New Money (free download), p9:
Non-cash money will be issued and put into circulation in the following way:
The first step will be for a central bank simply to write it into a current account which it manages for its government.... most importantly these will be debt-free payments...
The second step will be for the governments to spend the new money into circulation just as they spend other public revenue - on public expenditure programmes such as education, defence, servicing the national debt, etc.
See how Prof Richard Werner of the University of Southampton explains this remarkable possibility in a 7 minute YouTube video Debt-Free and Interest-Free Money. Or click on this article's 'very readable' link. Ben Dyson is leading a country-wide campaign on the same topic: Positive Money.
The maestro governors of central banks need to be transformed into our wise servants through Parliaments and Congresses as they create our money and transparently do their work to bring growth and safety to our economies. I wonder if they talked about this at Davos?
posted by Charles Bazlinton. BOOK: The Free Lunch- Fairness with Freedom
The FT editorial is wary of politicians steering monetary policy (as UK 1970's & 80's) and messing up with high inflation. But here is an interesting phrase from the FT leader writer:
'Democratically elected governments still have a role to play. They have the right to choose* a governor whose preferences regarding inflation are broadly consistent with their own. In some countries, such as the UK, politicians also set the central bank's objectives.'
That's OK then. We are to be allowed a little bit of democracy as far as the awesome power of central banks is concerned. But how have these current systems worked out?
[* Democratic element for the choice of the new BoE governor limited to a hurried interview and then leave it all up to Mark Carney's good judgement that the unfolding 'set objectives' arrive before the end of his 5 year term?]
Sir Mervyn King of the UK's BoE clearly admits that he failed to warn years back, about approaching dangers. See this blog 13 August 2012 The awesome power of central banks .
He, in Chris Giles' words, (Why Sir Mervyn has taken a walk on the supply side)
'has done a four year volte-face by admitting that the pre-crisis period was infected by unsustainable overexposed bank lending and unsustainable paths of consumption'.
So whatever the balance of independence, when the person placed to be the country's bank supremo can get it so wrong - and hats off to Sir Mervyn for his sackcloth and ashes admissions - the current system is clearly broken and wonky, with nasty noises in the back axle as it approaches Basel and unresponsive steering too. What more does the awesome, street facade of the Bank of England signify now, than just a studwork-and-plaster film set, signifying grandeur but hopelessly exposed as not fit for purpose for the real world? Help! It's our lives that they are playing with as they try and pretend the machine just needs an odd new committee bolted on here and a couple of safe banking ratios there, to fix it.
Here is good sense from a quite different monetary policy reform, proposed by Huber and Roberston in Creating New Money (free download), p9:
Non-cash money will be issued and put into circulation in the following way:
The first step will be for a central bank simply to write it into a current account which it manages for its government.... most importantly these will be debt-free payments...
The second step will be for the governments to spend the new money into circulation just as they spend other public revenue - on public expenditure programmes such as education, defence, servicing the national debt, etc.
See how Prof Richard Werner of the University of Southampton explains this remarkable possibility in a 7 minute YouTube video Debt-Free and Interest-Free Money. Or click on this article's 'very readable' link. Ben Dyson is leading a country-wide campaign on the same topic: Positive Money.
The maestro governors of central banks need to be transformed into our wise servants through Parliaments and Congresses as they create our money and transparently do their work to bring growth and safety to our economies. I wonder if they talked about this at Davos?
posted by Charles Bazlinton. BOOK: The Free Lunch- Fairness with Freedom
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