Why banks must be independent of ignorant politicians

Four top Republicans write an open letter to the Federal Reserve.

I have just read the dumbest letter ever. I have copied it below. It's a letter from the four top Republicans in Congress to Chairman Bernanke. It urges the Fed to do nothing because: "It could exacerbate current problems or further harm the US economy."

I have never heard such unsubstantiated tosh. It is unclear how lengthening the duration of assets held on its balance sheet could cause harm. This is a bit rich after the ridiculous shenanigans by the Republicans over the debt ceiling, which led to a downgrade. The risk of inflation is diminishing by the hour. These guys really have no idea. This really does illustrate well why central banks need to be independent of ignorant political interference.

Fortunately, the Fed will ignore them and instigate, perhaps, the $500bn Operation Twist today. It probably raised the prospects of the Fed acting as it's likely to have annoyed FOMC members who value their independence.

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures.

Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth, or reduced the unemployment rate . . . we have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy.

Sincerely, Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.