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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (77744)	4/16/2008 12:46:50 AM
From: Elroy Jetson	Read Replies (3) \| Respond to of 116555

The whole point of a central bank is to make monetary decisions independent of politics. Yes this goes badly wrong when an ideological nut like Alan Greenspan is placed in the job surrounded by sycophants. People who want to replace the central bank with the U.S. Treasury haven't the slightest idea what magnitude of disaster they are trying to conjure up in this lack of independence. This type of situation may be developing in Europe with the election of the criminal Silvio Berlusconi in Italy who will likely try to curtail the independence of the European central bank with the assistance of "the Paris Hilton of Europe", Nicolas Sarkozy of France. As for Australia, I imagine you obtained the false impression of a "lack of independence by the Reserve Bank of Australia during Paul Keating's era" due to some jokes Keating made about the RBA at a press conference in February 1989 that "they do what I say", and a comment in 1990 that they're "in my pocket". It was the RBA's independence which made Keating's joke so amusing. The evidence shows that the RBA continued to make decisions which were frequently inconvenient for Keating and the value of the Australian Dollar remained constant relative to the U.S. Dollar. The disastrous reign of Malcolm Fraser (Liberal) saw the value of the Australian Dollar plunge from 1975 to 1983. Once Bob Hawke (Labor) took over as PM the Australian Dollar stabilized. But inflation which had become unmangeable under PM Malcolm Fraser continued to be a problem since Bob Hawke did not replace Bob Johnston until the end of his term. Once Bob Hawke appointed economist Bernie Fraser to the RBA inflation became a non-problem almost immeadiately, ala Paul Volcker, and the value of the Australian Dollar remained stable. When Paul Keating (Labor) became PM these favorable conditions continued. The Australian Dollar took a plunge once John Howard (Liberal) took over as PM due to ill advised policies and didn't recover for eight years. It took the China driven commodity boom to save John Howard's bacon. During this entire period the RBA maintained their independence. There is no action John Howard took to provide the RBA with more independence - although he frequently scolded the RBA and gave them advice which Ian MacFarlane found "unhelpful". .