Stop Worshiping Central Banks

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Oct 18 2022 (IPS) Preoccupied with enhancing their own ‘credibility’ and reputations, central banks (CBs) are again driving the world economy into recession, financial turmoil and debt crises. Wall Street ‘cred’ Most CB governors believe ‘credibility’ is desirable and must be achieved by fighting inflation at any cost. To justify their own more harmful policies, they warn inflation is ‘damaging’. Anis ChowdhuryThey argue CBs need ‘independence’ from governments to pursue ‘credible’ monetary policy. Inflation targeting to ‘anchor’ inflation expectations is supposed to generate desired ‘confidence’. But CBs have been responsible for many costly failures. The US Fed deepened the 1930s’ Great Depression, the 1970s’ stagflation and the early 1980s’ contraction, besides contributing to the 2008-09 global financial crisis (GFC). Hence, CB notions of ‘credibility’ and ‘independence’ need to be reconsidered. Milton Friedman – whom many central bankers revere – blamed the 1930s’ Great Depression on US Fed actions and inactions. Instead of providing liquidity support for businesses struggling with short-term cash-flow problems, it squeezed credit and economies. But why did the Fed behave as it did? Some economic historians insist it was “to promote the interests of commercial banks, rather than economic recovery”. Monetary policy before and during the Great Depr...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Armed Conflicts Development & Aid Economy & Trade Financial Crisis Global Headlines Health Labour TerraViva United Nations IPS UN Bureau Jomo Kwame Sundaram & Anis Chowdhury Source Type: news