Saturday, 15 December 2007
Central bank independence
Many counties today have what is called an independent central bank. But as this article by Alister McFarquhar from the Adam Smith Institute argues that independence may be purely cosmetic. McFarquhar points out that in the UK the Bank of England is "... culpable when inflation targets are missed, but when they try to avoid moral hazard by not bailing out Northern Rock, the Treasury takes over." For McFarquhar what this shows is the weakness of ex-chancellor, now PM, Gordon Brown's tripartite system of financial regulation where the boundaries are blurred and the Treasury maintains close control, thereby nullifying the "independence" of the Bank of England.