Last week, Donald Trump, President of the United
States, rapped the country’s central bank for raising interest rates.
Immediately pundits called him to account for endangering the political
independence of the Federal Reserve. Criticism was so fierce that the US
Treasury Secretary, Steven Mnuchin, found it necessary to explain that Trump
was merely expressing a personal opinion – which, of course, is impossible for
a President to do.
Meanwhile, Nursultan Nazarbaev, President of
Kazakhstan, was lecturing the head of the country’s central bank on how to
regulate commercial banks. Nazarbaev said there were too many banks, which
increased insolvency and fraud. No one claimed that this was just a personal
opinion; Nazarbaev was giving the National Bank of Kazakhstan its marching
orders. (“I request: after this, you should not permit any more outrages.”)
Western central banks have prized their political
independence for decades. When US President Harry Truman asked the Federal
Reserve to hold down interest rates so that the government could finance the
Korean War cheaply, the Fed told him to take a hike. After all, caving in to the Oval Office has consequences: The high inflation of the Seventies in the US is often attributed partly to the
decision of Fed Chairman Arthur Burns to print dollars – under pressure from
President Richard Nixon, who wanted to jack up the economy long enough to get re-elected
in 1972.
Burns might have preferred Central Asia to Washington,
D.C. The central banks here don’t pretend to be free of the presidents. Of
course, Nazarbaev was targeting bank regulation, not monetary policy (although
he did say that he wanted a stable exchange rate). But a scolding like his of the central bank would have led the nightly newscast in the
West. In Kazakhstan, it barely made the bottom of page 1 of the business weekly
newspaper Kursiv’. –Leon Taylor tayloralmaty@gmail.com
Good
reading
Burton A. Abrams. How Richard Nixon pressured Arthur Burns:
evidence from the Nixon Tapes. Journal of Economic Perspectives. Fall 2006.
Pages 177-188.
References
Alan Rappeport. After Trump’s Fed comments, Mnuchin
offers a clarification. New York
Times. July 21, 2018
Madiya Torebaeva. N. Nazarbaev: Nam ne nuzhno stol’ko
bankov. [We don’t need so many banks.] Kursiv’.
July 18, 2018.
