I am delighted that Jeremy Corbyn was re-elected leader of the Labour party in the UK.
John McDonnell, Corbyn’s right hand man and go-to guy on economic policy, recently talked about the importance of monetary policy and that it should not be narrowly focused on inflation.
That was excellent, but why in the world is McDonnell guaranteeing Central Bank independence?
He said “Let me be clear that we will guarantee the independence of the Bank of England.”
So if the “independent” Bank of England defies a Corbyn-led government what would happen?
For example, Corbyn’s team consults with its most trusted technical advisers (Joe Stiglitz et al) who say the Bank of England is keeping interest rates too high and is stifling economic growth.
Does a Corbyn government simply plead with the Bank of England not to stop needlessly throwing people out of work or does it take forceful action?
It’s really hard to understate the importance of this question. Without the cooperation of the Bank of England, literally ever major aspect of Corbyn’s economic policy could be very badly undermined.
A defiant Bank of England could kill jobs, reduce growth, drive up budget deficits through increased borrowing costs and prop up trade deficits (which McDonnell wisely pointed to as a real problem) by propping up the value of the pound. As we also learned in 2007/8, an “independent” Bank of England allowed a huge housing bubble to inflate in the UK. Numerous “independent” central banks were guilty of this, most notoriously the Federal Reserve in the United States.
The establishment media is great at taking very stupid and obnoxious ideas and converting them into “conventional wisdom”.
The idea that Central Banks should be “independent” is one of the very worst. Corbyn’s team should completely reject it.