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The argument in favour of independent central banks

Summary:
Donald Trump has tweeted:Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world........The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!Which is the argument for central bank independence.You or we might think that Donald Trump should be re-elected - or not. But that boom or bust for the economy should be determined by his re-election prospects is

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Donald Trump has tweeted:

Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world........The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!

Which is the argument for central bank independence.

You or we might think that Donald Trump should be re-elected - or not. But that boom or bust for the economy should be determined by his re-election prospects is that argument in favour of central bank independence. As far as interest rates should be centrally determined their being so by politics is a seriously bad idea. Because, obviously enough, the motivation of a politician is to get re-elected, not to do what is independently best for the economy nor the people.

True, there are certain elections where one side winning rather than the other will clearly be better for said economy and said people. Thus we might even think that a bit of manipulation will be of benefit. It’s just that for incumbent politicians “certain” always means “this one with me in it” which isn’t the way to decent monetary policy.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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