Thursday, August 23, 2012

The awesome power of central banks - 2

Central banker Kate Barker has published her thoughts through the CentreForum: 'Macroeconomics: too much autonomy and too little coordination'.  Both these themes were part of the recent blog here (Aug13) 'The awesome power of central banks'. Kate Barker also has an article in the FT today:  'The BoE has too much power and not enough democracy'. She believes that the Chancellor of the Exchequer should have much more control even outside 'fast-moving times' which has now become his role. She questions why politicians shy away from directing coordination of policies. She believes that the breaking up into various separate roles for the Monetary Policy Committee,the new Financial Policy Committee and the Office of Budget Responsibility could be dangerous: 'having too many committees with their own remit raises risks of both underlap and overlap'  and 'Politicians should not too readily cede powers on the grounds that they themselves cannot be trusted with difficult decisions'. She ends her executive summary with the caution that too much was expected of the MPC, which bred over-confidence. 

In the Times she is quoted on the current Chancellor George Osborne: 'There is danger of self-defeating austerity, if some room for manoeuvre cannot be developed'. So if Barker is not confident in the Chancellor, but whom she wants to carry more responsibility, and is  wary that the next Governor of the BofE who will rule for 8 years, 'a very powerful unelected role', what hope is there for sensible, sustainable economic policy-making?  

The type of engagement given by the Treasury Select Committee (chairman Andrew Tyrie) must be an important part of the future of economic management. Regular engagement. Regular questions and answers. Where the soundness of the reasoning and decisions, and the mindset of the people wielding the power, be they central bankers, Chancellors of the Exchequer, Treasury officials or whoever unexpectedly rises to new influence in future, can be exposed. 
posted by Charles Bazlinton . Author The Free Lunch - Fairness with Freedom (Amazon)


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