Lea­ve the Fed Alo­ne

Handelsblatt Global Edition Magazine - - Front Page - BY FRANK WIEBE

In Ame­ri­ca and Eu­ro­pe, po­li­ti­ci­ans of both the left and the right want grea­ter con­trol over cen­tral banks. The foun­da­ti­on of sta­ble eco­no­mies is un­der thre­at.

It was a clas­sic, full-fron­tal Donald Trump at­tack. The Fe­deral Re­ser­ve was open­ly play­ing po­li­tics, the Re­pu­bli­can rai­led du­ring the cam­pai­gn. By ke­eping in­te­rest ra­tes “ar­ti­fi­ci­al­ly low,” Fed Chair Ja­net Yel­len was abusing the po­wer of the U.S. cen­tral bank in or­der to prop up the Oba­ma ad­mi­nis­tra­ti­on. She should be “as­ha­med” of her­s­elf.

Just one mo­re blast of stan­dard right-wing dem­ago­gue­ry? Ame­ri­can con­ser­va­ti­ves, af­ter all, of­ten lo­ve to bash the Fed. And ple­nty on the right open­ly ques­ti­on the wis­dom of al­lo­wing the cen­tral bank a pi­vo­tal ro­le in eco­no­mic po­li­cy. But the­se days, they are not alo­ne. What’s trou­bling is that the left, too, has ta­ken up the cau­se. In their own words, the pro­tes­ters “are fed up with the Fed.”

To be su­re, their com­plaints are the ve­ry op­po­si­te of the con­ser­va­ti­ves’. The new Fed-ha­ters worry that the bank will hi­ke in­te­rest ra­tes and cho­ke off eco­no­mic growth be­fo­re its be­ne­fits are felt by or­di­na­ry Ame­ri­cans. Any such mo­ve must be re­sis­ted un­til wa­ges ri­se and un­em­ploy­ment falls. Bor­ro­wing Yel­len’s own phra­se, they say “the Fed is the­re for ever­yo­ne.” But the un­der­ly­ing mes­sa­ge is alar­mingly si­mi­lar to Trump’s: The Fed nee­ds fet­te­ring.

And it’s not just the Fed that’s in the li­ne of fi­re. In the eu­ro zo­ne, calls by Ger­man po­li­ti­ci­ans for the Eu­ro­pean Cen­tral Bank to start rai­sing in­te­rest ra­tes again, ha­ve re­ached a cre­scen­do. Ear­lier this ye­ar, Fi­nan­ce Mi­nis­ter Wolf­gang Schäu­b­le laun­ched an al­most un­pre­ce­den­ted pu­b­lic at­tack on the ECB for what he con­siders to be a de­sta­bi­li­zing mo­ne­ta­ry po­li­cy. He even bla­med ECB Pre­si­dent Ma­rio Draghi for the ri­se of Ger­ma­ny’s right­wing par­ty, Al­ter­na­ti­ve for Ger­ma­ny.

Such cri­ti­cism is ou­t­right hy­po­cri­sy. The truth is that na­tio­nal go­vern­ments across the EU ha­ve be­en mo­re than hap­py to shuf­fle un­wan­ted re­s­pon­si­bi­li­ty on­to the ECB, for­cing it to find tem­pora­ry so­lu­ti­ons to pro­blems po­li­ti­ci­ans would ra­ther avo­id. In par­ti­cu­lar, they ha­ve left the bank to sort out the con­se­quen­ces of Eu­ro­pe’s go­vern­ment debt cri­sis and shaky ban­king sec­tor, al­beit with ina­de­qua­te me­ans. Yet tho­se sa­me po­li­ti­ci­ans now ha­ve the gall to ac­cu­se the bank of set­ting fis­cal po­li­cy.

As yet, the po­li­ti­cal pres­su­re on the ECB ma­kes litt­le dif­fe­rence. It’s hard to ar­gue for ra­di­cal chan­ge when the eco­no­my seems sta­ble en­ough. Con­tra­ry to the pro­phets of doom, the­re is no sign of im­pen­ding eco­no­mic col­lap­se or ram­pant in­fla­ti­on. But con­sider the long-term dan­gers; mo­ne­ta­ry

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