Does the political branch make the decisions? No. But they choose the people that do!
This by no means implies any control over interest rates. At all.
People are appointed, and that's where political input ends. And those appointed stay appointed, are not chosen lightly, markets do not react well to poor choice.
By your metric, you'd think our Supreme court judges were puppets too. They aren't.
People may have political leanings, but understand, that is not the same as allowing input where it is not allowed.
The government cannot interfere with the judicial branch, nor with fiscal policy. To do so, renders it a banana republic, or dictatorship, any attempts would be disaster, for those appointed take this very seriously.
A core part of the job is to ignore ministers, the PMO, and so on.
Can you name a country that has a strong, fair, and just judicial system without having complete control of their monetary policy?
I can’t even begin to imagine how that country would continue to exist. A government that doesn’t control its own monetary policy isn’t a government at all.
I was just referencing the fact that we have no democratic say over the fed rate in the US. Not trying to say democracy is bad, just that we don't really have it with respect to interest rate policy.
In the countries that you think of as having 'strong, fair, and just judicial systems' governments typically control only the fiscal policy. Monetary policy is left to some independent entity. For countries with fixed exchange rates it is also impossible to have autonomous monetary policy without imposing restrictions on capital mobility. This also applies to blocks of countries, e.g., none of the individual governments of euro countries have control over the bloc's monetary policy.
Do you really expect the entire country to change its monetary policy in order to accommodate the peculiar way in which you conduct your finances? That doesn't seem very reasonable.
My point is simply like a lot of other things, government financial policy should be set based on science and understanding, not by politicians in power who feel they know best.
> The state or its bank largely has to set interest rates to something - it gets to choose central bank deposit rates and bond coupons. It doesn't get to set yield (that's set at auction) but it has to set the bond payout to something.
The Monetary Authority of Singapore doesn't do anything about interest rates. Neither does the equivalent institution in Hong Kong.
The policy lever in Singapore is the foreign exchange rate. In Hong Kong, they more or less just fix the exchange rate to the USD.
Singapore happens to have lots of government debt for weird reasons. Hong Kong has almost none. (And you could easily imagine a version Singapore without government debt.) So there wouldn't necessarily be deposit rates or bond coupons to set at all.
In general, economies also don't need central banks. Many economies do just fine without them.
Good examples today are lots of smaller economies that just don't bother with their own currencies, the process is commonly called 'dollarisation'. But historically we also had examples of successful large economies with privately issues means of payment and minimal government regulation. The free banking episodes in eg Canada, Scotland or Australia are well documented.
You won't find the quotes from US Presidents (present excluded). Heads of state who comment harshly on reserve bank decisions are typically met with steepening rates enforced by the sovereign debt market's perception of higher credit risk.
It prevents governments from controlling their own fiscal policy. It doesn’t fit AT ALL with the way any solvent government currently runs their country. The only place it fits are countries with unstable or nonexistent financial markets.
This by no means implies any control over interest rates. At all.
People are appointed, and that's where political input ends. And those appointed stay appointed, are not chosen lightly, markets do not react well to poor choice.
By your metric, you'd think our Supreme court judges were puppets too. They aren't.
People may have political leanings, but understand, that is not the same as allowing input where it is not allowed.
The government cannot interfere with the judicial branch, nor with fiscal policy. To do so, renders it a banana republic, or dictatorship, any attempts would be disaster, for those appointed take this very seriously.
A core part of the job is to ignore ministers, the PMO, and so on.
It is entirely independent.
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