Blog: Imagine Monetary Policy Implemented by Politicians
Would they have the guts to crash the economic party?
A couple of weeks ago I promised not to write about anything political unless it was tied to economics or the markets. This week I'm going to broach an economic topic that has appeared in the political arena. I'd like to briefly discuss my thoughts on central bank independence. It has been suggested many times over the years that a government body as influential as the Fed should not be independent, but should instead be answerable to elected officials. While there have been arguments on both sides of the question, there are several points that have not been discussed that are important. Those points are:
- If elected officials want to have a say in controlling inflation, why don't they use the tools they have rather than ignoring them?
- The Fed has not always been independent. What happened in those previous times?
The real question is, when the economy is booming will politicians have the guts to crash the party like the Fed does?