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June 01, 2018

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e

What if credible expert judgement wasn't only required to stand before their peers and explain, but also before the public who are affected? For example, be required to broadcast quarterly briefing with less jargon but not dumbed down. Over time democracy and fairness might feel better served. Perhaps, if any number of fields were involved, the lay observer/voters might get a better feel for how politicians, and commentators alike, can be inclined to interpret the expert to particular advantage; that more often its the interpretation that's stale and white, not necessarily the expert.

Nanikore

Three of the MPC members (including the Governor) are ex-Goldman Sachs. Is that the sort of legitimacy we want?

NK.

Bill Posters

Since when is expertise an overarching requirement to be on the MPC?

Andrew 'Death' Sentance was on the the MPC for four long years plus.

They are setting rates on the MPC. I want someone on there who knows what it's like to be seriously in hock. Someone with a big mortgage juggling impressive credit card balances. Someone who has been repossessed and maybe has a couple of ccj's against them.

James Peach

Bill that is the single most insane thing I have ever heard.

derrida derider

"a lot of the job of setting interest rates requires you to interpret noisy high-frequency data and, arguably, to have market feel"
"A decent trading-floor economist might well be able to take interest rate decisions as well as Haskel."

As a Marxist you should see what is wrong with this. Interest rate decisions may only weakly affect GDP (though that's arguable), but they have strong effects on the distribution of that GDP. It's basically why the old rich have always encouraged the worship of market sentiment and "hard money".

Perhaps read your Kalecki again.

derrida derider

And Bill Posters has pushed his point way too far, but it basically is the same point I just made. He aint insane, just angry.

Robert Mitchell

Central banks do more harm than good mucking about with interest rates. The Fed raised rates up to 2008, arguably triggering a default wave that set traders panicking to devalue the collateral value of Mortgage-backed Securities.

Today, the Fed pays interest on excess reserves to disincentivize banks from undercutting the policy rate. The unintended effect is likely a huge distortion in currency swap markets, where the law of covered interest parity has been in violation for a decade. Banks prefer to get the Fed's interest so dollar swaps now command a premium over borrowing dollars at published rates. If you want a free lunch, borrow dollars and then swap them into Euros and you will get back more dollars than you have to pay back. Economists are generally at a loss to explain the persistence of arbitrage opportunities in currency swap markets; one explanation proposed that the Fed's interest on excess reserves play a role in why big banks are not lending dollars below currency swap rates.

The existence of persistent arbitrage in the huge currency swap markets invalidates fair pricing formulas that rely on the assumption of no arbitrage. If central banks are contributing to the long-term arbitrage conditions, they are making prices arbitrary: free lunches exist, negative prices are possible, pricing is not bounded by textbook fair pricing equations.

Ralph Musgrave

Robert Mitchell (just above) is right to question the merits of interest rate adjustments. Milton Friedman and Warren Mosler (founder of Modern Monetary Theory) advocated a permanent zero interest rate. I've actually just published a paper supporting that "Friedman/Mosler" idea:

http://ralphanomics.blogspot.com/2018/06/the-merits-of-permanent-zero-interest.html

Ralph Musgrave

I'm on the scrounge.....The journal I'm submitting the paper to asks authors to suggest people who might review submissions. Anyone like to review my paper? It's about 5,000 words.

Blissex

«I want someone on there who knows what it's like to be seriously in hock. Someone with a big mortgage juggling impressive credit card balances. Someone who has been repossessed and maybe has a couple of ccj's against them.»

Bob Diamond? Any other CEO of one of the many massively bankrupt megabank?
Except that they sleep well, because the Fed and the BoE bend over to supply them with "liquidity" at near zero "friends of friends" discount rates.

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