Adam Posen and Mark Carney are speaking - the Bank's conference on indepence

Mark Carney: We can't fix inequality.  Adam Posen, a former Bank of England Policymaker, says central bankers cannot ignore the fact that they make us all rich, or poorer, by their actions.

 

Adam Posen and Mark Carney was speaking at the Bank's conference on independence. The comments on invequality, but he's put his finger on the underlying issue. Namely, monetary policy has distributional effects.

 

Mark Carney also insists that the Bank of England isn't to blame for economic inequality.

Asked if capitalism is broken, the BoE governor tells the Today Programme there are two foundations of prosperity - price stability (steady inflation), and financial stability (banks that don't blow up).

Mark Carney's argument is that it's up to governments to address that - most likely by changing the tax rate to claw back money from wealthier citizens who benefit when the Bank drives up asset prices through its QE asset purchase scheme.


Posen says that central bankers have to be open about the fact that they are making a choice between inflation and unemployment when they set interest rates. Monetary policy dictates how fast prices rise, or how many more people join the ranks of the unemployed.


The gap between rich and poor are crucial issues, but these are issues for the government and broader society. They are not the responsibility of the Bank of England.

The BoE's job is to use its toolkit to prevent another financial crisis, Mark Carney continues:

The people who get hurt when inflation goes up, or banks go down, are the poorest people in society. Without question, time and time again.

Our job is to make sure that doesn't happen, then the taxpayer doesn't have to bailout someone in the City.

There are a host of other things that need to happen to growth the economy, and then society has to decide how to distribute the gains of that growth, not the Bank of England.

For 20 or 30 years, Posen says, central bankers have got away with arguing that they only focus on aggregates - ie, the overall impact of their policies.

But that era is over; if central bankers want to keep the public's support, they need to be more explicit about the impact of their actions.

Monetary policy does have its limits, of course; Adam Posen also reminds us that some central bankers are looking to governments to do more.

 

Kilde:

Twitter @gstorro

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2 kommentarer

Macroeconomics

12.10.2017 kl.20:36

The role of the central bank has never been to redistribute income. The FED's role is to stabilize prices, economic growth and the usd.

In modern times it has been governments role to redistribute income. In Norway government has gone quite far in reaching economical equality but some think there is still room to go on.

Interesting blog Gunn.

gunnstorro

12.10.2017 kl.21:40

Macroeconomics: Macroeconomics: Today our government presenting our budget for 2018. Its their role to redistribute income. Central Bank's role to help on the broader economy.

Sorry folks our government increase our inequality in the budget.

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