RBA Watch: The joke that is RBA “independence”

To read the original version of this comment in the original context at Macrobusiness.com.au click this link. (link maybe locked – but there is a free trial available)

The RBA May interest rate meeting “game” has kicked off yet again – who has got the inside whisper! Who has been dancing with the trainer’s niece at a CWA knees up in Walgett?

Is it the long toothed sage or the new kid on the block or are they all just lucky guesses.   The NKOTB has been given short odds and certainly sounds certain so the Glass Pyramid will go with that – the RBA will cut folks!.   As discussed here and here– the path to ZIRP under the current economic model is simply a question of when not if.

It is embarrassing enough that the RBA have lost control of the economy and are now watching it rotate faster and faster as it disappears down the ZIRP / household debt / foreign debt plug hole as the “currency warfare” by our trading rivals/allies gets out of control.

We can put that down to the ideological obsessions of the economic model they have been made responsible for implementing by the pollies.

The bit that is outrageous is the lack of clear and unambiguous warnings of what is happening and any explanation of the alternatives to the current model that should at least be discussed.

There is nothing about the RBA charter or their role as public servants, especially ‘independent’ public servants, that prevents them from making clear public statements to the following effect.

“Our job is to apply the economic model that we have been tasked to apply and we are doing that but it is clearly not working and is causing lasting damage to the economy and putting at risk the future prosperity of the country. The nation must immediately start discussing what changes to the model should be made. These are some of the options….…”

It is what the RBA are not saying that is culpable.

Instead all we get (at best – as many of the senior leadership do not even do this) are butt covering tin plate mutterings and whispers from the highest levels of RBA management over canapes and fine wines to select audiences – usually from the FIRE sector. Enough to allow them to say “we sort of told you so” but not enough to provide clear and robust guidance to the public that there is a serious debate that must be had, be demanded from the politicians and the nature of that debate.

The more junior members of the RBA staff, that still have the capacity for genuine independent thought, must cringe every time they peruse the speeches of their senior managers.

Delphic whispers are NOT ENOUGH.

The so called “independence” of the RBA is a sham.  It has created a perception that the staff and the board of the RBA are removed from the day to day mud slinging, pork fests, short term-ism of the political process and are offering the nation ‘independent’ wisdom and sober judgment.

While that may be true, in fact all that they are doing are applying a highly specific and failed economic model that reflects a highly specific economic ideology.

Placing the implementation of that model in the hands of an ‘independent’ body that stands apart from the political process that is answerable to the public at regular elections is all part of the “ideology” as it removes a fundamental part of the responsibility for economic management (monetary policy) away from the democratic process and places it in the hands of a priestly caste applying some pseudo science that is inherently anti-democratic.

There is nothing democratic about outsourcing public money supply creation to private profit making banks and their bonus hunting executives and watching that bank created money supply pump up the value of real and financial assets.

There is nothing democratic about huddling behind the fig leaf argument that the money will trickle down via the “wealth effect” i.e.  rich people spending some of the dough directed their way by the asset price pumping exercise.

There is nothing democratic about claiming the role of fiscal policy is to run surpluses and leave economic management to the ZIRP / household debt / asset price ponzinomics of the RBA.

There is plenty democratic about the proposals recently discussed in Iceland for reform of the monetary system but down under we cannot even get the discussion started because the guardians of our monetary system choose to pretend it is not required.

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