Interest rate setting policy should not be the preserve of elites. It should be managed by democratically elected politicians who are accountable to a parliament and their electorates for the decisions that they make, especially when they are inappropriate and harmful.
Whether this is more democratic or not it will lead to higher interest rates. Because those folks out there in the markets, the people looking for places to save their money, don’t trust politicians. Or even, think they might set rates for democratic reasons – like getting re-elected – rather than economic ones. Thus market rates are higher in places where politicians set interest rates not even roughly independent central banks.
I wonder if there’s anywhere that might provide a guide to how well it would work? Turkey perhaps?
Well that’s a death knell for the ECB.
TMB
That was my first thought! Interesting that he is in favour of ‘democracy’ only when it suits…
But I don’t know anyone happy with an interest rate of 0.1% – strange that he seems to be defending homeowners. One does wonder how much debt he is in that a rise in interest rates of 0.15% would cause him such personal anguish
I’m old, I want interest rates of 10% to give me a return on my savings. And I vote. Gimmie gimmie gimmie. Democracy Roolz!
So why don’t parties just appoint their stooges to the role of bank governor? The most extreme example is Jimmy Carter who chose inflation-crushing Paul Volcker for the Federal Reserve in 1979, even though the Democrats controlled all three branches of government. (They had strong majorities too: 58-41 in the Senate, 277-157 in the lower house).
Why does he contradict himself? “Democratically elected” politicians are the élite.
Of course, if he’s also calling for them to give up their £90k salaries, expenses, subsidised eateries, and foreign jaunts…
Interest rates should be set by agreement between borrowers and lenders. Governments and central bankers, and popular votes should have no role whatsoever. Grrrr
Wait, are the accountable to the parliament or to the electorate – very different things.