There’s no such thing as central bank independence. Not now, not ever.
To believe otherwise is to believe that what was created by Congress, and whose senior officials are appointed by presidents and voted on by Congress, can somehow be independent. On its face such a view is preposterous. And impossible.
Still, it’s worth addressing what’s preposterous and impossible: the idea of an independent central bank. As in what if Fed officials were incredibly narrowly focused automatons, wholly intent on conducting so-called “monetary policy” without regard to politics? If so, it would make no difference.
While John Maynard Keynes got much wrong, he wisely observed that “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” Yes, precisely.
Texas Tech professor Alexander Salter routinely makes a case for an “independent” Fed free of political influences, but Salter is hardly free himself. He subscribes to a view that the exchange media producers use to facilitate exchange with other producers must be centrally planned by economists in non-inflationary fashion. Stop and think about that. The conceit is astounding.
While the 20th century revealed in murderous fashion how unequal government was to planning production, Salter would like to ascribe to a creation of government the power to control the quantity and cost of exchange media that logically mirror production. Except that a government that can in no way plan anything but scarcity logically can’t plan the quantity of money associated with abundance.
Beyond the overwhelming absurdity of the belief that so-called “money supply” can be centrally planned, beyond the even more overwhelming absurdity that the central planning of the latter will result in a “stable price level” (whatever that is) even though prices are an effect of infinite decisions made every millisecond by billions of people around the world, it has to be said that central banks are staffed by humans with political and economic views. Which means they’re not independent even if they’re independent.
Instead, and if not constrained a little or a lot by the politicians whom they politicked ahead of getting their jobs, they’ll bring their own views about how government should intervene in the natural workings of the market. Which means they’ll bring not independence to the central bank, but a deeply political view that on the matter of money, interest rates and banking regulation, the markets themselves are insufficient such that government must step in to tweak what markets are allegedly doing wrong.
It’s just a comment that while Salter, Nicholas Cachanosky, Jai Kedia, and countless other scholars desire an “independent” central bank, they expose the fatuity and false nature of their expressed desires when they clamor for “Fed independence.” The latter brings new meaning to oxymoron.
Worse, it implies that there’s good and bad government intervention. No, the narrow substitution of “expert” knowledge for that of information-pregnant marketplaces is always and everywhere unfortunate.
All of which begs the scholarly class to cease their pretense about the impossibility of “Fed independence.” They want no such thing. Instead, they desire a central bank that is “independent” only insofar as it vainly attempts to centrally plan so-called “monetary policy” in ways that mirror their own views. Except that their own views are political, involve government intervention in the natural workings of the marketplace, which means they’re wrong.
They’re also unnecessary. That’s because money in circulation is as natural a market phenomenon as the production that instigates it.
Which means the only Fed “independence” is a do-nothing Fed that economists could never countenance. After all, they need jobs too.
