Friday, May 22, 2015

Yannis Papadimitriou — Tsipras at odds with central bank governor

Syriza accuses [Governor Yiannis] Stournaras [head of the Bank of Greece] of sometimes behaving like a minister in the previous conservative government. This accusation is not plucked from thin air: For two years the Oxford-educated economist served under conservative chief Antonis Samaras as finance minister and in this function contributed significantly to the relative stabilization of the Greek economy. However, at that time he also made a lot of enemies on the left. In June 2014, he moved from the ministry to the bank. He made himself a target last December, when he publicly spoke out against early elections. Stournaras has been a "red flag" for the leftists ever since.
But economist Thanassis Mavridis, who runs the online business portal "Capital" is also unable to warm to Stournaras. "I understand the concerns about the independence of the Bank of Greece, but frankly, if we take the concept of independence literally, then Stournaras would not have been allowed to go directly from the treasury to the executive offices of the central bank," he said in an interview with DW.

A timeout of at least a few months would be appropriate in this case, he said, adding: "What would the Germans think if Wolfgang Schäuble were appointed new Bundesbank president overnight? Would that be a good sign for the independence of the central bank?"
DW (Deutsche Welle)
Tsipras at odds with central bank governor
Yannis Papadimitriou
ht Clonal


NeilW said...

This 'independence of the central bank' thing is a real religious red line for economists isn't it.

Can't possibly have the money creator subject to direct democratic control. That might end up with the plebs in charge!

John said...

Are economists being deliberately mendacious or are they confused by "central bank independence". Economists do seem to be an astonishingly naive bunch.

Regarding this issue of "independence", Peter Martin wrote to the BBC with a devastating question and put down rolled into one:

"Is the BoE independent? It is owned by the Treasury solicitor. Did it decide, independently, to buy some £350 billion or so of Government gilts from financial institutions as part of the QE program?”

Is it even imaginable that the BoE or any central bank would have looked at the treasury issue above and said that they would rather pass? First of all, it can't refuse an order from the government, though I would love to see them attempt it! Second of all, and I think I'm right in saying this, a refusal to implement this buying of bonds would send monetary and fiscal policy into a tailspin.

Clearly "independent central banks" are no such thing. A former Fed Chairman explained the obvious when he stated that "the Fed in independent within government, not from government".

The idea of independence is PR government propaganda for the public. When governments want to do something unpopular they hide behind the knowing fiction of "independence", and the central banks play along, taking the heat. Having brainwashed themselves, economists don't play along as the central bankers do; no, the economists actually believe this nonsense about "independence".

Meanwhile, if government wants to do something that a truly independent central bank thinks is unadvisable or downright stupid, it is in no position to refuse.

Governments have created the perfect case of "plausible deniability" with "central bank independence".

It isn't that democratic control is not a good idea. Governments have as much control of central bank policy as they wish to have. That they refuse to exercise it on behalf of the people is the issue. That they exercise it on behalf of a parasitical and socially useless private baking sector is the other issue.

Ignacio said...

CB can stay independent as long as they follow the interests of finance and the deep state. See? Problem solved.