The myth of central bank independence has done its job: depoliticise the economy, insulate elites from scrutiny and block democratic choice — it’s time to bury it once and for all
It's difficult to generalize arcross the entire world, but in fact for the case of the US the problem is indeed that the Fed is not actually run according to a political mandate - it is run by the oligarchy: the ultra rich who have majority control of the banks, and therefore of the Federal Reseve Bank and its baord.
The same oligarchy.. however also happens to totally run government in the US:
So in TOTAL both monetary policy and fiscal policy are set by the oligarchy,
The problem is not therefore a question of whether the Fed answers to the puppet political "leaders" or not. Problem is the 0.01% who control all and wring wealth out of the other 99.9% of people through this control.
Please correct me if I'm mistaken, but wasn't there a relatively recent court case where a US citizen was denied a FOI request on the grounds that the Federal Reserve was not an agency of the US Federal Government ?
As far as I know, the so-called "Federal Reserve" is a consortium of private banks, incl. Deutsche Bank & the Bank of Tokyo et al.
If true, it also explains why the US flag didn't fly from the mast of The Fed building (until recently - after more people pointed it out).
I am among those who fail to see the bottom line of this analysis. As a not-so-independent institution, on one hand, a central bank is not different from those many technical committees (COVID committees are a glaring example), which are used to impose unlikable laws without taking political responsibility. And yet, on the other hand, a central bank is quite different from those various committees and think tanks. A central bank really has its own share of agency.
So this analysis, on one side, criticises central banks when they are not independent from the executive power, because, it seems, the executive power outsources its action to them. On the other side it criticises central banks when they are truly independent, because, that way, they become unaccountable and some kind of an un-democratic overgovernment. The lesson, or point, of the article seems to be that central banks should be just part of the government, maybe of the treasury, and governments should take both action and direct responsibility for those actions. This could be an undesirable outcome in my opinion, not least because the tasks of a central bank are not clearly defined and different central banks have, or historically had, different powers. Let's take the (enormously complicated and part of an even more complicated historical process) example of the ECB and the Berlusconi government, which is mentioned in the article.
Berlusconi became PM in 2008 when Italy was financially at its best in forty years or so. The international situation, however, was ominous with an incoming period of financial turmoil which was timely predicted. Berlusconi ignored the international situation and went with the plan of tax cuts, that is he quickly increased the public debt at the worst possible time. At this point, however, the ECB had still no real power over his government. The ECB, as was created and as was intended by Duisenberg and Trichet, had not the mission, or power, to buy government bonds, i.e. to be a creditor of European governments.
Here comes the trick. Trichet was forced, by political power (!), to buy those bonds and keep afloat those governments through the means of the central bank. As a consequence, however, European governments became dependent on the ECB, that is, their main creditor. Draghi, who became the new president of the ECB that same year 2011, unlike his predecessors, fully embraced the buying of treasury bonds (destroying the Euro as a currency in the process), turning the ECB into the neoliberal tool, which is today.
We notice then several problems. If a CB is just a government branch, and if the CB has the power to buy treasury bonds, would not that be the biggest, most shameful example of buyback? Actually, the ECB, as it was designed, was not that bad. It had limited powers and a focused mission and it was accountable to the European Parliament, that is the most democratic power of the EU. Shamefully enough, the EP was scaled back in favour of less democratic institutions, like the Commission.
Another problem is that being independent and being unaccountable are two different situation. A private business, let's say a grocery store, is an independent enterprise: its business choices are not dictated by the government or the parliament. However that does not mean that the store is not held accountable of its choices. A government should be an independent power of the state, but that does not mean that its actions are not accountable. As a matter of fact, the Congress has the power to impeach the President or his secretaries, that is the executive power is held accountable by the legislative power. The same happens in parliamentary republics and their motions of no confidence.
The idea behind the Federal Reserve and the European Central Bank was that those institutions had to be independent from the executive power, but accountable for the legislative and judiciary power. In the case of the ECB, moreover, the mission of the institution was much more focused and limited than that of the Fed.
One more problem is the idea that central banks are some special case of undemocratic institutions in a wanna-be-democratic state. The judiciary power is a glaring example of an undemocratic power, which is, by the way, undemocratic by design in modern so-called democracies. The judiciary is as politicised and even less accountable than CBs. So singling out Central Banks, in my opinion, the article fails to see the bigger picture of a system that is collapsing on its own contradictions. The utter failure of the judiciary system, a totally undemocratic, self-referencing caste, opens the door to the kind of abuses we saw from Berlusconi, and we see from Trump. The same happens with CBs, but the solution is not the institutionalisation of the abuse.
If Congress oversees the Fed, then what you're saying is that 541 people who have been bought off by different money interests and do not vote as they promised they would during campaigns, that these 541 bribed people oversee the Fed. Woo hoo. So now, we have Trump, one bribed person, trying to change the Fed.
What a change.
I hold to Alex Krainer's view on Trump- that believes Trump IS trying to fight finance capital. Yes Trump is bribed, but not by the globalists. The globalists hate him. And if that is true, firing a Fed member could be good for ordinary people.
So get rid of the fed here in the states and in the EU get rid of the CB. So how then controls the money flow into the system. The government is your conclusion and by that you mean Congress here in the states and the chief Ececutive officer head of government in each individual country. So it becomes very political and shirt term thinking that runs the show of Monitory policy Thomas. Who's in control Thomas....you criticized but didn't resolve the big question of who's running/controlling the flow of money. Or did I miss something.
It's difficult to generalize arcross the entire world, but in fact for the case of the US the problem is indeed that the Fed is not actually run according to a political mandate - it is run by the oligarchy: the ultra rich who have majority control of the banks, and therefore of the Federal Reseve Bank and its baord.
The same oligarchy.. however also happens to totally run government in the US:
https://archive.org/details/gilens_and_page_2014_-testing_theories_of_american_politics.doc
So in TOTAL both monetary policy and fiscal policy are set by the oligarchy,
The problem is not therefore a question of whether the Fed answers to the puppet political "leaders" or not. Problem is the 0.01% who control all and wring wealth out of the other 99.9% of people through this control.
Please correct me if I'm mistaken, but wasn't there a relatively recent court case where a US citizen was denied a FOI request on the grounds that the Federal Reserve was not an agency of the US Federal Government ?
As far as I know, the so-called "Federal Reserve" is a consortium of private banks, incl. Deutsche Bank & the Bank of Tokyo et al.
If true, it also explains why the US flag didn't fly from the mast of The Fed building (until recently - after more people pointed it out).
Yep.
Thanks for that.
I am among those who fail to see the bottom line of this analysis. As a not-so-independent institution, on one hand, a central bank is not different from those many technical committees (COVID committees are a glaring example), which are used to impose unlikable laws without taking political responsibility. And yet, on the other hand, a central bank is quite different from those various committees and think tanks. A central bank really has its own share of agency.
So this analysis, on one side, criticises central banks when they are not independent from the executive power, because, it seems, the executive power outsources its action to them. On the other side it criticises central banks when they are truly independent, because, that way, they become unaccountable and some kind of an un-democratic overgovernment. The lesson, or point, of the article seems to be that central banks should be just part of the government, maybe of the treasury, and governments should take both action and direct responsibility for those actions. This could be an undesirable outcome in my opinion, not least because the tasks of a central bank are not clearly defined and different central banks have, or historically had, different powers. Let's take the (enormously complicated and part of an even more complicated historical process) example of the ECB and the Berlusconi government, which is mentioned in the article.
Berlusconi became PM in 2008 when Italy was financially at its best in forty years or so. The international situation, however, was ominous with an incoming period of financial turmoil which was timely predicted. Berlusconi ignored the international situation and went with the plan of tax cuts, that is he quickly increased the public debt at the worst possible time. At this point, however, the ECB had still no real power over his government. The ECB, as was created and as was intended by Duisenberg and Trichet, had not the mission, or power, to buy government bonds, i.e. to be a creditor of European governments.
Here comes the trick. Trichet was forced, by political power (!), to buy those bonds and keep afloat those governments through the means of the central bank. As a consequence, however, European governments became dependent on the ECB, that is, their main creditor. Draghi, who became the new president of the ECB that same year 2011, unlike his predecessors, fully embraced the buying of treasury bonds (destroying the Euro as a currency in the process), turning the ECB into the neoliberal tool, which is today.
We notice then several problems. If a CB is just a government branch, and if the CB has the power to buy treasury bonds, would not that be the biggest, most shameful example of buyback? Actually, the ECB, as it was designed, was not that bad. It had limited powers and a focused mission and it was accountable to the European Parliament, that is the most democratic power of the EU. Shamefully enough, the EP was scaled back in favour of less democratic institutions, like the Commission.
(This follows the parent comment.)
Another problem is that being independent and being unaccountable are two different situation. A private business, let's say a grocery store, is an independent enterprise: its business choices are not dictated by the government or the parliament. However that does not mean that the store is not held accountable of its choices. A government should be an independent power of the state, but that does not mean that its actions are not accountable. As a matter of fact, the Congress has the power to impeach the President or his secretaries, that is the executive power is held accountable by the legislative power. The same happens in parliamentary republics and their motions of no confidence.
The idea behind the Federal Reserve and the European Central Bank was that those institutions had to be independent from the executive power, but accountable for the legislative and judiciary power. In the case of the ECB, moreover, the mission of the institution was much more focused and limited than that of the Fed.
One more problem is the idea that central banks are some special case of undemocratic institutions in a wanna-be-democratic state. The judiciary power is a glaring example of an undemocratic power, which is, by the way, undemocratic by design in modern so-called democracies. The judiciary is as politicised and even less accountable than CBs. So singling out Central Banks, in my opinion, the article fails to see the bigger picture of a system that is collapsing on its own contradictions. The utter failure of the judiciary system, a totally undemocratic, self-referencing caste, opens the door to the kind of abuses we saw from Berlusconi, and we see from Trump. The same happens with CBs, but the solution is not the institutionalisation of the abuse.
If Congress oversees the Fed, then what you're saying is that 541 people who have been bought off by different money interests and do not vote as they promised they would during campaigns, that these 541 bribed people oversee the Fed. Woo hoo. So now, we have Trump, one bribed person, trying to change the Fed.
What a change.
I hold to Alex Krainer's view on Trump- that believes Trump IS trying to fight finance capital. Yes Trump is bribed, but not by the globalists. The globalists hate him. And if that is true, firing a Fed member could be good for ordinary people.
So get rid of the fed here in the states and in the EU get rid of the CB. So how then controls the money flow into the system. The government is your conclusion and by that you mean Congress here in the states and the chief Ececutive officer head of government in each individual country. So it becomes very political and shirt term thinking that runs the show of Monitory policy Thomas. Who's in control Thomas....you criticized but didn't resolve the big question of who's running/controlling the flow of money. Or did I miss something.