Re: ECB and world-wide recession

[phillp2@xxxxxxxxxxxxxxx]

 James Cumes wrote:


> They have found, not a solution, but someone to blame and to do so in
> keeping with the fashion of the time.
>
>
> James Cumes
> http://members.chello.at/schulte-baeuminghaus
>
>
  I don't know how many on the list know the Canadian situation
but the Bank of Canada is not legally or constitutionally
independent in the sense of the ECB or the Federal Reserve.
Moreover, its legislation calls for it to manage the system to control
inflation but also to promote growth and reduce unemployment.

However, during the 1950s when James Coyne was governor of the
Bank of Canada he instituted a form of monetarism (without the
theoretical trappings) to counteract what he called "living beyond
our means."  The subsequent "tight money" (and recession)
produced a backlash on the Conservative government which
responded by saying "it is not our fault, it is the BofC's fault and it
is independent"  -- which of course it was not.

Subsequently, the Liberal government dismissed Coyne but not
over his disasterous monetary policy, but for increasing his pension
(if I remember correctly.)  This became a cause celebre with the
Conservatives coming to his parliamentary rescue with typical
political immorality (or maybe it was the otherway round.  Neither
party showed any honour or consistency in this fiasco.)

In any case, the subsequent compromise has been that the BofC
is independent in its day to day operations but if the government
disagrees with the overall thrust of its monetary policy it can
summon the Governor of the Bank and instruct him to follow some
alternative policy.  Technically, this is done through persuasion as
a first step, a written instruction as a second.  If the Governor does
not agree to follow those instructions, he must resign and be
replaced by a government appointment.

In fact, of course, in recent years the Conservatives neo-
conservative and the Liberals have been ultra neoliberal and hence
neither have objected to the BofC's monetarism and its obsession
with zero inflation which, of course, is the prime reason why
Canada's unemployment rate stands at around 3 per cent higher
than in the US and why it has been that way for the last decade or
so.

Paul Phillips,
Economics,
University of Manitoba