One is a patriotic populist and the other’s a patriot autocrat. Other than their patriotism, however, they also share one important operating characteristic. They still believe politicians should be doing monetary policy.
Russian Prime Minister Vladimir Putin on Tuesday called for lower bank lending rates to the real economy, just a day after a hike in the central bank's deposit rates came into effect.
'Loan rates, especially for the real economy, should not restrain growth,' Putin said on a visit to Russia's second largest lender, state-controlled VTB, where he heads the supervisory board.
'We understand this and I hope will work together with the central bank in order to gradually reduce lending rates.'
—“Putin calls for lower lending rates,” MOSCOW, Dec 28 (Reuters)
(Ron Paul) on Mr. Bernanke: ''There is something fishy about the head of the world's most powerful government bureaucracy, one that is involved in a full-time counterfeiting operation to sustain monopolistic financial cartels, and the world's most powerful central planner, who sets the price of money worldwide, proclaiming the glories of capitalism.''
—“The Fed? He’s Not a Fan,” New York, December 29 (The New York Times)
Maybe, it reflects the unique self-confidence of former spies and physician politicians—both professions habitually second guess others. So, it’s possible that many who thrive at spying and doctoring think they could do banking recreationally.
When copper, silver and gold were the dominant universal currencies, central bankers had little room to make decisions, to well or poorly serve the broader public interest. However, once the world set aside metal as the decision-maker the human intellect was left to decide.
In many places, money supply and interest rate decisions were democratized. On the hustings, candidates railed against high interest rates and promised to expand credit. Progressively, however, democratic governments and mainstream political parties discovered that keeping their political concerns out of monetary decisions lead to a more trusted and secure currency.
Central banks their economic experts proved to be better than elected governments at separating real trends from noise and correcting their mistakes.
Of course, independent central banks make mistakes and arguments about their mistakes lead men such as Putin and Paul to want to interfere. Group think, technical arrogance, as well as excellence, can influence independent agencies. Arguments about reporting processes and bank mandates, especially after a spectacular financial crisis, are unavoidable and could lead to positive change.
However, let’s keep in mind what a power struggle over political oversight is about. It’s not about whether monetary decision-makers should be appointed by representatives of the people. They are and it works. It is whether the people’s representatives should have an active role in central bank decision-making. Or to put it bluntly: other than a talent for judging others, should we invite politicians to start managing major global currencies?
Before thinking seriously about making the US dollar—the currency of the global economy—more sensitive to the concerns of elected politicians let’s keep in mind how they are doing in managing fiscal policy which is their sovereign responsibility. Over the last two years, the US Federal Reserve has acted decisively to stabilize the American and the world economies. At this moment, Congress and the President can’t agree on a budget for the last fiscal year.