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Ritchie on central bank independence

Ritchie’s arguing that the politicians should be allowed to tell the BoE what to o with interest rates and the money supply.

Rather forgetting why we stopped allowing them to do that. Because they screwed it up.


20 thoughts on “Ritchie on central bank independence”

  1. Re screwing up, politicians didn’t actually completely screw it up prior to 1997 when Gordon Brown gave the BoE independence. That is, we didn’t have permanent hyperinflation between WWII and 1997. Still, I prefer independent central banks.

  2. Tim, this is a bit forced isn’t it? All he’s suggesting is that we go back to 1997, on the basis that the elected government should make and be accountable for central bank decisions.

    This is a fair point made by many.

    Just let the ball come on to the bat as they say.

  3. Not forced at all. The general view is that when CB independence was granted then the inflation risk premium fell away. Proof that the markets did think that the politicians had screwed it up and now they wouldn’t be able to.

  4. Surely the point is that Richie wants to bring the BoE back under government control precisely to force it to make different choices to the ones they would make to keep inflation under control.

  5. I don’t know how old Jack C is, but I’m old enough to remember the traditional BoE rate cut just before the ruling party conference, and in the run up to an election of course. Or delaying a necessary rise until after those events if a cut was utterly out of the question.

  6. Jim,
    I didn’t say I agreed with him, but it’s not a clear-cut argument.

    It’s democratic accountability (and/or base politicking) v leaving it to the experts (which has its own flaws).

    I’m for leaving it as it is myself.

  7. @Jack C, it’s not ‘leaving it to the experts’, at least not entirely. It’s enforcing clear delegation. BoE has independence to meet the target set by Government. Everyone knows what the target is, when it changes (if ever), and how it’s being met (or not).

    The point is *not* that we don’t want BoE to be guided by elected Govt, it’s that we want transparancy in how Govt are doing so.

  8. There’s also the small matter that member states’ central bank independence was a Maastricht Treaty requirement. Of course, it was dressed up as being Gordon Brown’s “decision”.

  9. NielsR,
    Like I said, I’m for leaving it as it is.

    The point is you don’t have to be a Murphaloon to hold the opposing view.

    I suspect his motivation is unsound, totalitarianism probably, but that’s a different matter.

  10. PQE is in breach of Article 123 of the Lisbon Treaty, while breaking BoE independence breaches Articles 130 and 131.

    Is Corbyn proposing Brexit? I think we should be told.

  11. Umm, we do don’t we? Beyond the bank rate, certainly we do. The BoE only influences long term rates after all.

  12. @Jack C – yep, I get that you’re playing Devil’s advocate. But my point its that either arrangement leaves democratic accountability intact. RM’s arguing for the less-transparent, less-independent version of BoE instruction without offering much in return.

  13. NielsR,
    I think he’d argue that it was more transparent (or better anyway), because rate-setting would be by the elected government, thus putting accountability where it should be.

    So, he agrees with the likes of Mrs Thatcher on this, if not for the same reasons. He’s a governmentalist.

    Of course, I can’t see him approving of any decisions made by Osborne.

    (Partly related, “the progressive majority” myth has started again on TRUK).

  14. Offered without comment, other than to say that the Murphaloon doesn’t seem to have repudiated it:

    Andrew Dickie says:
    September 21 2015 at 9:53 am
    In my opinion we are seeing the development of the transformational change described by Marx, where successive QUANTITATIVE changes build up to produce a QUALITATIVE change, as a new mode of production breaks away from the fetters of the old.

    I am not sure whether that Marxian language actually applies (though Corbyn’s approach to new forms of social ownership my constitute a “new mode of production”), and so prefer the language of “paradigm shift” resulting from the movement of the tectonic plates of what are “the givens” of the time.

    For there can be little doubt but that at last – and very long-delayed, after the Great Financial Crash of 2008 totally discredited TINA and neo-liberalism and “trickle down”, exposing the Emperor’s nakedness for all to see “if they have eyes to see” (which, alas, they usually hadn’t, because hands were firmly clamped over their eyes to preserve their ignorance!) – but that the old hegemony has shattered, and its total discrediting is on the point of being widely accepted.

    The truth is, then, that, if he can craft the language correctly, Jeremy Corbyn could win, and win big in 2020, but equally could come an enormous cropper – language is key. As to Chuka Umunna – sorry, no way. As Richard says, “But how can a neoliberal offer an authentic non-neoliberal agenda?”.

    I’ve often likened TINA and neo-liberalism to pre-enlightenment medicine, which believed in blood-letting as a way of “releasing pressures in the body to restore the balance of the Four Humours”. Frankly, neo-liberalism is the economic equivalent of a Four Humours theory of the economy, and TINA and austerity are doing more to kill, rather than cure. And “more of the same” will do just that – kill the patient. So, until Chuka, and all the other Red Neo-Liberals in the Labour Party give up their adherence to an economic theory that belongs to the age of alchemy – no way!

  15. All these attacks on Murphy and yet the TORY PM can stick his todger in the mouth of a dead pig and… not a dickie bird. Now imagine if that had been Jezbollah.

  16. @ KJ
    Somebody says that an unnamed person says that someone else saw (but that someone else never replies when written to) that DC underwent an initiation rite to a club to which (according to all the reports on Bullingdon Club) he never belonged.
    There are, very rarely, occasions when one regrets that duelling has been outlawed.

  17. Andrew K

    It’s not surprising there’s no refutation – Andrew Dickie is a long time supporter of mass murder provided the victims are worthy of that fate. He defends the USSR to the hilt – his only regret that it no longer exists. He is also one of Murphy’s chief lickspittles so the likelihood of him being challenged is quite remote….

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