Oh my, another post of mine on central banking!
But I cannot help it!
1) Today's Reuters interview with the governor of the central bank of India: Greater need to ensure autonomy to central banks - RBI
This argument may be valid re India's specific case, but http://www.blogger.com/img/blank.gifin light of JC Junker's recent comments at the European Parliament that there is a need for an exchange rate policy and that the Euro is over-valued, the reverse argument is probably more applicable for the EU (the Eurozone actually).
2) Simon Johnson's (MIT professor, my alma mater (SB 1985) and former chief economist at the IMF) article in the New York Times (June 9): The Banking Emperor Has No Clothes.
It is a must read article, which refers to Tim Geithner inspired by a major speech Geithner made earlier this week to the American Bankers Association’s international monetary conference. A Treasury Secretary in the Obama administration, Mr Geithner was the governor of the NY Fed, one of 12 Federal Reserve Banks in the US that in turn "participate" in the US Federal Reserve Bank.
BTW, who "owns" the NY Fed (and most of the other 11 regional Feds in the US. as far as I know)? The banks! Ie the ones being supervised by the Fed in question. Oh my!
Dr. Johnson, whose views on the Euro crisis I do not usually agree with, makes though some interesting criticism of T. Geithner's philosophy and views, especially re which of the 2, the US or the UK, has the "lighter" financial regulations.
My main point:
Both of these articles stimulated me to think the following (yes, I am word playing around with the economic stimulus thing):
There is lots of criticism, by the so called Eurosceptics, whose main den is to be found in the UK but they are basically all over the place (ie planet), of an EU "democratic deficit".
Side note: I do not see the consistency of such an argument, especially when it talks of "unelected Eurocrats" (referring to the Commissioners etc) when it is coming from active citizens of a country/polity whose upper house has members that are not elected! But on this occasion my point is this:
Is central bank independence (which is nevertheless prescribed in the current EU Treaties in the case of the ECB) not an element of democratic deficit?
To the extent that the central bank, via market operations, sets a central interest rate that in turn affects liquidity thus inflation but also affects the price of the currency in the world markets vis-a-vis other currencies, how can a givernment of any kind have the ability to have an exchange rate policy as the President of the Eurogroup suggested the Eurozone should have, earlier this week?
Analyse this (or more precisely, factor this in in your understanding of the systemics of the world we live in)!