At a time when most governments seem incapable of doing anything about unemployment, worsening economic inequality, and continuing financial instability, Argentina has adopted a set of striking new reforms that will enable its central bank to play a much more proactive role in addressing all of these problems. In fact, the reforms, adopted in March, may be the first shots fired in a quiet revolution in monetary policy. If successful, they could threaten to overturn 25 years of conservative central bank policies that have long been considered best practice by the IMF and central banks around the world.
Argentina's new central bank president, Mercedes Marcó del Pont, said the reforms challenge the conservative axiom that central banks should play a very limited role in the economy. The bank is now rediscovering its sovereign capacity to formulate and implement economic policy, she explained, adding that some of the portraits on the bank's hall of fame would be coming down -- "beginning with Milton Friedman's."
Stalwarts of free markets and "central bank independence" were aghast. The Economist proclaimed that the Argentine central bank had become the "piggy bank" of the government, "losing the last shred of its legal independence." It claimed the government's meddling in the central bank would lead to reckless fiscal deficits and spark out-of-control inflation. Similarly, The Wall Street Journal's Mary Anastasia O'Grady reported the state had "stormed the central bank... destroying the last vestiges of independence," and told its readers to "Cry for Argentina."Read it at TruthOut
The Shots Heard Round the World: Argentina's Radical Banking Reforms
By Rick Rowden, Foreign Policy | News Analysis