The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, July 30, 2010

Why we should all be worried about global central banking

The very erudite Willem Buiter puts the politicisation risks I have been referring to recently this way:

"In the real world, the usual outcome in a stand-off between the monetary and fiscal authority is Fiscal Dominance — the victory of the fiscal authorities and the monetisation of public sector deficits and debt. Monetary Dominance, in which the central bank forces the fiscal authority to cut its primary deficit to stabilise the public debt burden, is the exception to the rule. The reason is that regardless of the formal language of the laws ensuring operational independence or even operational and target independence of the central bank, when push comes to shove, the fiscal authority has the political clout to force the central bank to do its bidding.

In many countries there are even formal ‘override’ clauses in the Act establishing the supposedly independent central bank that permit the fiscal authority, in an emergency or under exceptional circumstances (to be defined by the fiscal authority), to give binding instructions to the central bank or even to take over the making of monetary policy from the Governor of the Central Bank and/or the committee making monetary policy."