Finance, Forex and Investments

Should monetary policy be made by an independent central bank?

Should monetary policy be made by an independent central bank? Monetary policy has a lasting effect in Canada, but members of the Bank of Canada's Governing Council are not held directly accountable to elected officials or to the public. The following questions address the costs and benefits of central bank independence. Which of the following is an example of the time inconsistency of policy? A:The inflation rate equals 5% and the Bank of Canada announces that its target inflation rate is 2%, but the next day the Bank of Canada reduces the overnight rate. B: The government faces re-election and gets Parliament to cut taxes before the campaign begins. C: The Prime Minister asks the Bank of Canada to lower the overnight rate, but the Governor of the Bank refuses for fear of inflation. D: The government lowers taxes and increases government purchases whenever economic indicators show an approaching recession.

Public Comments

1. Sounds like you're on to something. Hmmm. Let's think. Actually, the Central Bank is not so much an indepedent body as it is a tool for those wealthy enough to own a piece of it. Here in the United States, our central bank is called the Federal Reserve. Quite official sounding. You'd almost expect it to be a part of the Treasury Dept., or something. Especically when you consider that it has the sole right to print our currency, thereby gaining the ability to control the cost of the currency. You did know that the central bank always wants the right to print money so they can then sell it to the government with interest - didn't you? Of course in the USA the people ARE the government. Or, so says our Constitution. Sounds good on paper, but in a practicle sense it justs gets in the way of good business. Besides, the people will be very happy to cough up the needed tax revenue whenever the next financial failure occurs. At least, as long as their leader is smart, handsome, charismatic, and has a sense of humor. Now that I think about it, you really did ask a loaded question. My goodness we could go on forever about how the founding fathers abhorred the central bank. Jefferson went so far as to write condemnations about how this practice was a scourge on Europe, and should never be allowed on American soil. Took 'til 1913 for those same Europeans to get an American Congress to pass a bill that would establish the Federal Reserve. A totally private entity, whose inception was based upon the need for an alternative to the existing system of governmental control of the currency, a need established by a falsified and fraudulent run on the banks in previous years. So you see, they can do whatever they want. Read some of the statements made by the Rothschild family members, and you will feel a chill. One of which went somethng like this: "Give me control of a nations currency, and I care not who makes the laws." Makes you wonder. Think about it. Put yourself in the position of one of these people that control a central bank. Most of them are related, either by birth or marriage, and work with each other on a daily, ongoing basis. You have exclusive power over the printing of your country's currency. You are a private citizen. You are not responsible to any governmental authority, nor can any government impose their will upon you. You are autonomous, untouchable. What do you do with your time? To answer that question, simply read the history of money for the past 500 years. And don't expect your government to ever tell you the truth about their relationship with this cancerous entity.
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3. The past 20 years have brought major changes in monetary policy, in Norway and abroad. Most central banks now have instrument independence, and price stability is the common objective of monetary policy. The organization of the monetary policy decision within central banks has also changed. This decision is now typically taken by a committee. There have also been major changes in terms of transparency and communication. These developments are the product of both economic theory and historical developments. Despite similar developments across countries, there are still differences, particularly in the composition, size and working methods of monetary policy committees, but also in how central banks communicate. Differences across countries are probably a reflection of different economies and different traditions. Theoretical and empirical research provide guidance as to the optimal framework, but do not give a clear answer.