Looking In On The Real Paul Ryan–The Retiring Speaker of House


April 19, 2016

Looking In On The Real Paul Ryan–The Retiring Speaker of  House

he mistake about Paul Ryan, the one that both friends and foes made over the years between his Obama-era ascent and his just-announced departure from the House speakership, was to imagine him as a potential protagonist for our politics, a lead actor in the drama of conservatism, a visionary or a villain poised to put his stamp upon the era.

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Paul Ryan, Party Man

 

This Ryan-of-the-imagination existed among conservatives who portrayed his budgetary blueprints as the G.O.P.’s answer to the New Deal, among centrist deficit hawks who looked to him to hash out their pined-for grand bargain, and among liberals for whom Ryan was the most sinister of far-right operators, part fanatic and part huckster — a Lyle Lanley with “Atlas Shrugged” in his back pocket, playing everyone for suckers while he marched the country into a libertarian dystopia.

It existed among the donors who wanted him to run for President, the pundits who encouraged Mitt Romney to choose him as a running mate, the big names who pressured him into the speakership. And it existed among anti-Trump conservatives, finally, who looked to Ryan to be the Republican of principle standing athwart Trumpism yelling stop.

But the real Ryan was never suited for these roles. He was miscast as a visionary when he was fundamentally a party man — a diligent and policy-oriented champion for whatever the institutional G.O.P. appeared to want, a pilot who ultimately let the party choose the vessel’s course. And because the institutional G.O.P. during his years was like a bayou airboat with a fire in its propeller and several alligators wrestling midship, an unhappy end for his career was all-but-foreordained.

This is not to say that he lacked principles. The frequent descriptions of Ryan as a Jack Kemp acolyte — a supply-side tax cutter and entitlement reformer and free trader who imagined a more immigrant-welcoming and minority-friendly G.O.P. — were accurate enough; there was no question that the more a policy reflected Ryan’s deepest preferences, the more Kempist it would be.

But even there, he came to those principles at a time when they were ascendant within the party — in the period between the supply-side ’80s and the late-1990s window when centrist liberals seemed open to entitlement reform. And then as Republicans moved away from them, tacking now more compassionate-conservative, now more libertarian, now more Trumpist, his resistance to the drift was always gentle, eclipsed by his willingness to turn.

Image result for Jack Kemp anJack Kemp

Thus the Ryan of the George W. Bush era cast votes for the pillars of compassionate conservatism, No Child Left Behind and Medicare Part D. Then the Ryan of the Tea Party era championed austerity, talking about “makers and takers” and tossing out the Ayn Rand references that persuaded many liberals that he was an ideological fanatic. But that Ryan gave way to Ryan the dutiful running mate, which gave way in turn to the more moderate Ryan of Obama’s second term, who negotiated a budget deal with Democrats and moved toward so-called “reform conservatism” in his policy proposals at a time when that seemed like that might be the party’s future.

Then came the 2016 election, in which Ryan temporarily resisted Trump and then surrendered lest he break the party (which a party man could never do), and after that the Trump administration, in which Ryan has obviously steered Trump toward standard Republican policies — but has just as obviously been steered as well. Most of Ryan’s past big-picture goals (entitlement reform, free trade, minority outreach) are compromised or gone, and while he attempted Obamacare repeal and achieved a butchered version of corporate tax reform, he’s accepted spending policies that make a mockery of any sort of libertarian or limited-government goal.

Image result for Jack Kemp anJack Kemp

If you look at all this and see an obsessive ideologue working tirelessly for Randian ends, I think you’re being daft. But it’s equally daft to see this as the story of a great visionary brought low by Trump. The truth is that Ryan probably could have thrived as a legislator in a variety of dispensations: As a Reaganite if he’d been born early enough; as a Kempian or compassionate conservative if the late-1990s boom had continued; as a bipartisan dealmaker in a world where his base supported compromises (the blueprints he drew up with Democrats like Ron Wyden were usually interesting); as some sort of reform-conservative-inflected figure under a President Rubio or Kasich.

But in a dispensation where the G.O.P. was leaderless, rudderless, yawing between libertarian and populist extremes, he was never the kind of figure who could impose a vision on the party — nor would he would break with the party when it seemed to go insane.

Instead, he only knew how to work within the system, which because the system had turned into a madhouse meant that his career could only end where it ended this past week: in a record of failure on policy and principle that he chose for himself, believing — as party men always do — that there wasn’t any choice.

Nicholas Kristof is off today.

I invite you to follow me on Twitter (@DouthatNYT).

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Voodoonomics: How successive governments impoverished Malaysians


March 15, 2018

Voodoonomics: How successive governments impoverished Malaysians

by P. Gunasegaran@www.malaysiakini.com

A QUESTION OF BUSINESS | At least two ways – both very wrong in the longer term – were used to support the export sector in Malaysia in believing that growth through exports was the right thing for a developing country like Malaysia.

Even though there was economic growth, which means more wealth was created, there was impoverishment too. But how could that be? Basically, those who were rich got richer and those who were poor got poorer.

How did the government achieve export competitiveness over the years? Through two measures. First, they reduced the number of things Malaysians generally could buy by opting for a policy which weakened the ringgit. And two, they imported poverty by allowing the uncontrolled import of cheap labour.

Both improved Malaysia’s competitiveness not by raising productivity, although there was some of that, but by cutting down the cost of labour through the import of cheap labour (imported poverty) and lowering the relative value of the currency or currency depreciation, effectively lowering costs in US dollars.

Let’s look at these measures in turn.

1. Currency Depreciation

The ringgit fell in value from around as strong as around RM2.2 to the US dollar in 1980 to around RM4.0 now. The US dollar appreciated by over 80% during the period and the ringgit lost over four-tenths of its value relative to the US dollar.

Consider what that does: if an imported food item cost US$1, it was RM2.2 in 1980. But it rises to RM4 now, an increase of some 82%. But consider it now from the exporter’s perspective: If he sells something for US$1 overseas now, he gets RM4 versus RM2.2 then, again 82% more.

Unless he shares this benefit equitably with the worker – and in practice, he does not – a depreciated currency is a subsidy to exporters and a tax on workers because everyone depends on imported goods and even services for a good part of what they consume. Think in terms of food, clothing and buying from foreign chains.

While a depreciated currency improves the appearance of export figures in ringgit terms, it is still not a long-term solution for the betterment of people because it directly impoverishes a major part of the public by reducing their purchasing power – the amount they can buy with the ringgit.

2. Importing poverty through cheap foreign labour

The next major stupid move successive governments did was to import cheap labour from overseas. Until today, this is largely from Indonesia, Philippines, Bangladesh and India.

In the 1980s, this happened in the plantations affecting mainly Indian Malaysians who were displaced from the estates due to cheap Indonesian legal and illegal labour. Soon, this imported cheap labour spread into all areas, heavily depressing labour wages, affecting all Malaysian labour including Malays.

Was wealth ever created?

How terribly short-sighted! While developed countries were importing skilled and white-collar workers from developing countries, Malaysia, still very much a developing country then (and still is despite what others say), was importing cheap labour from other countries, depressing wages of a large section – probably as much as 50% – of its own workforce.

What kind of a madness was this that at the same time inhibited improved productivity by opening the tap to cheap labour and delayed the invention and adoption of new processes to reduce labour input while improving productivity per person through training and automation?

Till this day, when employers complain of labour shortage, it irritates one to see imported labour at car parks, for instance, being used to hand out parking tickets even after the process has been automated at the entry points.

Drive further in and you see others directing traffic and blowing loudly on whistles. The price of labour is so cheap that imported labour is used for such menial tasks. Are Malaysians so illiterate that they can’t read and follow signs?

As if the whole situation is not ridiculous enough, government officials and ministers regularly regurgitate garbage by saying that labour imports are necessary because Malaysians do not want to do these jobs. Pay them enough and Malaysians will do the job. Perhaps the ministers should send their daughters and sons to do this kind of work for a pittance.

And as many millions of workers are imported, a thriving business sanctioned by the government sprouts up living off the blood and sweat of workers and exploiting employers by making both parties pay ridiculous amounts for legal import, driving them towards employing illegal workers.

One may ask, what then is the alternative? If you want a broad section of the public to get richer and more affluent, the only way is to create wealth for everyone.

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That means improving the overall productivity or output per person so that he or she deserves a higher wage. Not by creating wealth for some and impoverishing most via currency depreciation and depressing wages.

Ah, yes but how do you do that? There is only the hard way. First, improve the quality of education for all and focus on the right kind of education which will make people employable.

Next promote the kind of industries which will increase the dollar value of output per person and ensure that productivity gains drive wealth creation, not cost-cutting.

Third, ensure that as much as possible of the resources go towards improving educational opportunities and building the necessary infrastructure for continuing productivity improvements with as little leakage as possible.

How much of this has been done since independence? Little.

The frightening part

According to Khazanah Research Institute’s (KRI) ‘State of Household Report’ dated November 2014 and Employees Provident Fund (EPF) data on individual incomes which includes salary or wages, overtime payments and bonus in 2013:

  • 96 percent of active EPF members earned less than RM6,000 a month
  • 85 percent less than RM4,000
  • 62 percent less than RM2,000

That’s a telling figure – 62 percent of workers earn less than RM2,000 a month. How can many of them live comfortably with such an income, especially when they have children to support?

Meantime, the median monthly salaries and wages per month for individuals was RM1,700 in 2013 (see chart below). That means half of all workers get this much or less, KRI explains.

And what does an illegal Indonesian worker earn in a month these days? In March, there are 27 working days including Saturdays on which they typically work as well. Industry employers say Indonesian illegal workers cost RM70 a day, casual, that means not contracted. Multiply that figure by 27, we get RM1,890 for the month of March.

Now, the frightening part is that this is more than the RM1,700 median salary for Malaysia which means that 50% of Malaysians earn less than casual Indonesian workers!

Clearly, the majority of the country lives in poverty. Income gains for the wage-earner have not gone up enough. And for a country like Malaysia with abundant resources and which once had the highest income in Asia after Japan, that reflects a failure of government.

If one needs an example of successful economic development, you just need to look across the Causeway which started pretty much from where Malaysia did and look where it is now with the adoption of the right policy mix coupled with an incorruptible government.

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The currency–the Singapore Dollar– is now valued at three times Malaysia’s against about parity in 1980 and its per capita income is among the highest in the world.

We are not saying that Singapore is the perfect state but in terms of economic development, they have beaten us by far and continue to do so.


P GUNASEGARAM still hopes that sometime in the future (perhaps soon?) there will be a government not only of the people but for the people. E-mail him at t.p.guna@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Jerome Powell’s Big Challenge at The Federal Reserve


March 1, 2018

Jerome Powell’s Big Challenge at The Federal Reserve

by John Cassidy@www.newyorker.com

https://www.newyorker.com/news/our-columnists/jerome-powells-big-challenge?mbid=nl_Daily 022818&CNDID=49438257&spMailingID

“…Powell has taken over the Fed at a delicate moment. With no reliable partner in the White House or on Capitol Hill, he has to finish the job that Yellen started: rolling back the extraordinary measures the Fed took in the wake of the Great Recession without causing a relapse. Even if he succeeds, the journey is unlikely to be without some turbulence.”–John Cassidy

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Dr Janet Yellen welcomes her successor Jerome ‘Jay’ Powell to The Fed

When Jerome Powell, the new head of the Federal Reserve, emerged from the Rayburn House Office Building on Tuesday at lunchtime, he may well have said to himself, “Mission accomplished.” During more than three hours of testimony before the House Financial Services Committee, Powell, who replaced Janet Yellen at the start of this month, didn’t say anything that was particularly unexpected or that raised doubts about his competence.

Still, the Dow fell by three hundred points after Powell’s appearance. Wall Street, which had been expecting the Fed to raise interest rates three times this year, cottoned onto his assertion that the economic outlook had strengthened recently, taking this to mean that four rate hikes, rather than three, could be on the way. Anticipating this possibility, traders sold stocks.

Despite the reaction in the markets, Powell was careful to leave himself plenty of flexibility. He emphasized that he “wouldn’t want to prejudge” the future course of rates, and he pointed out that inflation “remains below our two-per-cent longer-run objective.” In the future, he said, the Fed would “continue to strike a balance between avoiding an overheating economy and bringing . . . price inflation to two per cent on a sustained basis.”

Yellen could easily have spoken these same words. In fact, she did utter very similar ones. Addressing the National Association for Business Economics in September, she said, “Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession.”

Yellen’s response to the inflation risk she perceived was to raise the federal funds rate slowly. Since an initial move, in December, 2015, the Fed’s gradual policy tightening has taken the funds rate from zero to 1.5 per cent. By historical standards, this is still a very low level, and Powell expressly said that he was working toward “continuity in monetary policy.”

Yellen could easily have spoken these same words. In fact, she did utter very similar ones. Addressing the National Association for Business Economics in September, she said, “Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession.”

Yellen’s response to the inflation risk she perceived was to raise the federal funds rate slowly. Since an initial move, in December, 2015, the Fed’s gradual policy tightening has taken the funds rate from zero to 1.5 per cent. By historical standards, this is still a very low level, and Powell expressly said that he was working toward “continuity in monetary policy.”

As I noted a few weeks ago, this policy move was the opposite of what most economics textbooks would recommend, partly because it raised the risk of the economy running into capacity constraints. Even before Powell’s testimony, investors had started fretting that Congress’s recent actions would prompt the Fed to raise rates more rapidly, and these worries contributed to the recent wild swings in the stock market.

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Powell, a Republican investment banker who served in the Bush Administration, didn’t openly criticize the policy priorities of President Trump and the G.O.P. But he did point out that “some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” and he specifically mentioned the recent change in fiscal policy. Asked about the rising national debt, he said, “I think we are not on a sustainable fiscal path.”

Powell also noted that he and his colleagues were still in a “process of discovering” how low the jobless rate could go before inflation started rising. For now, there is no reason to suppose that he will abort this process, which has allowed employment and incomes to grow steadily in the past few years. Inflation remains quiescent, and, despite the G.O.P. fiscal stimulus, it may well remain that way.

Even today, there could be some hidden slack left in the economy, which, in any case, may be less inflation-prone than it once was, thanks to structural shifts such as digitization and globalization. As the Fed watcher Tim Duy, an economist at the University of Oregon, pointed out on Twitter during Powell’s testimony, “our inflation concerns over the past two decades have been much ado about nothing.”

The fact remains, however, that Powell has taken over the Fed at a delicate moment. With no reliable partner in the White House or on Capitol Hill, he has to finish the job that Yellen started: rolling back the extraordinary measures the Fed took in the wake of the Great Recession without causing a relapse. Even if he succeeds, the journey is unlikely to be without some turbulence.

John Cassidy has been a staff writer at The New Yorker since 1995. He also writes a column about politics, economics, and more for newyorker.com.

America’s extraordinary economic gamble –The Economist


February 13, 2018

The Economist

Souped up growth

America’s extraordinary economic gamble

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The mood of fiscal insouciance in Washington, DC, is troubling. Add the extra spending to rising pension and health-care costs, and America is set to run deficits above 5% of GDP for the foreseeable future. Excluding the deep recessions of the early 1980s and 2008, the United States is being more profligate than at any time since 1945.–The Economist

Fiscal policy is adding to demand even as the economy is running hot

Print edition | Leaders

Feb 8th 2018

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VOLATILITY is back. A long spell of calm, in which America’s stockmarket rose steadily without a big sell-off, ended abruptly this week. The catalyst was a report released on February 2nd showing that wage growth in America had accelerated. The S&P 500 fell by a bit that day, and by a lot on the next trading day. The Vix, an index that reflects how changeable investors expect equity markets to be, spiked from a sleepy 14 at the start of the month to an alarmed 37. In other parts of the world nerves frayed.

Markets later regained some of their composure (see article). But more adrenalin-fuelled sessions lie ahead. That is because a transition is under way in which buoyant global growth causes inflation to replace stagnation as investors’ biggest fear. And that long-awaited shift is being complicated by an extraordinary gamble in the world’s biggest economy. Thanks to the recently enacted tax cuts, America is adding a hefty fiscal boost to juice up an expansion that is already mature. Public borrowing is set to double to $1 trillion, or 5% of GDP, in the next fiscal year. What is more, the team that is steering this experiment, both in the White House and the Federal Reserve, is the most inexperienced in recent memory. Whether the outcome is boom or bust, it is going to be a wild ride.

Fire your engines

The recent equity-market gyrations by themselves give little cause for concern. The world economy remains in fine fettle, buoyed by a synchronised acceleration in America, Europe and Asia. The violence of the repricing was because of newfangled vehicles that had been caught out betting on low volatility. However, even as they scrambled to react to its re-emergence, the collateral damage to other markets, such as corporate bonds and foreign exchange, was limited. Despite the plunge, American stock prices have fallen back only to where they were at the beginning of the year.

Yet this episode does signal just what may lie ahead. After years in which investors could rely on central banks for support, the safety net of extraordinarily loose monetary policy is slowly being dismantled. America’s Federal Reserve has raised interest rates five times already since late 2015 and is set to do so again next month. Ten-year Treasury-bond yields have risen from below 2.1% in September to 2.8%. Stock markets are in a tug-of-war between stronger profits, which warrant higher share prices, and higher bond yields, which depress the present value of those earnings and make eye-watering valuations harder to justify.

This tension is an inevitable part of the return of monetary policy to more normal conditions. What is not inevitable is the scale of America’s impending fiscal bet. Economists reckon that Mr Trump’s tax reform, which lowers bills for firms and wealthy Americans—and to a lesser extent for ordinary workers—will jolt consumption and investment to boost growth by around 0.3% this year. And Congress is about to boost government spending, if a budget deal announced this week holds up. Democrats are to get more funds for child care and other goodies; hawks in both parties have won more money for the defence budget. Mr Trump, meanwhile, still wants his border wall and an infrastructure plan. The mood of fiscal insouciance in Washington, DC, is troubling. Add the extra spending to rising pension and health-care costs, and America is set to run deficits above 5% of GDP for the foreseeable future. Excluding the deep recessions of the early 1980s and 2008, the United States is being more profligate than at any time since 1945.

A cocktail of expensive stock markets, a maturing business cycle and fiscal largesse would test the mettle of the most experienced policymakers. Instead, American fiscal policy is being run by people who have bought into the mantra that deficits don’t matter. And the central bank has a brand new boss, Jerome Powell, who, unlike his recent predecessors, has no formal expertise in monetary policy.

Does Powell like fast cars?

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Jerome “Jay” Powell succeeds Janet Yellen as head of the Federal Reserve: To tighten or not to tighten, that is the question for Mr. Powell

What will determine how this gamble turns out? In the medium term, America will have to get to grips with its fiscal deficit. Otherwise interest rates will eventually soar, much as they did in the 1980s. But in the short term most hangs on Mr Powell, who must steer between two opposite dangers. One is that he is too doveish, backing away from the gradual (and fairly modest) tightening in the Fed’s current plans as a salve to jittery financial markets. In effect, he would be creating a “Powell put” which would in time lead to financial bubbles. The other danger is that the Fed tightens too much too fast because it fears the economy is overheating.

On balance, hasty tightening is the greater risk. New to his role, Mr Powell may be tempted to establish his inflation-fighting chops—and his independence from the White House—by pushing for higher rates faster. That would be a mistake, for three reasons.

First, it is far from clear that the economy is at full employment. Policymakers tend to consider those who have dropped out of the jobs market as lost to the economy for good. Yet many have been returning to work, and plenty more may yet follow (see article). Second, the risk of a sudden burst of inflation is limited. Wage growth has picked up only gradually in America. There is little evidence of it in Germany and Japan, which also have low unemployment. The wage-bargaining arrangements behind the explosive wage-price spiral of the early 1970s are long gone. Third, there are sizeable benefits from letting the labour market tighten further. Wages are growing fastest at the bottom of the earnings scale. That not only helps the blue-collar workers who have been hit disproportionately hard by technological change and globalisation. It also prompts firms to invest more in capital equipment, giving a boost to productivity growth.

To be clear, this newspaper would not advise a fiscal stimulus of the scale that America is undertaking. It is poorly designed and recklessly large. It will add to financial-market volatility. But now that this experiment is under way, it is even more important that the Fed does not lose its head.

This article appeared in the Leaders section of the print edition under the headline “Running hot”

The Era of Fiscal Austerity Is Over. Here’s What Big Deficits Mean for the US​ Economy.


February 11, 2018

The Era of Fiscal Austerity Is Over. Here’s What Big Deficits Mean for the US​ Economy.

Change is afoot at the top of Central Banks


February 5, 2018

THE ECONOMIST

Situations vacant

Change is afoot at the top of Central Banks

The growing powers of central banks will give rise to a different type of boss

The signs are that central bankers of Ms Yellen’s kind (nurtured in academia, immersed in economic models, aloof from politics) are out of favour.  The new central-bank bosses will probably, like Mr Powell, be generalists versed in the ways of government and masters of a brief rather than a theory. They are set, in short, to be more agreeable to politicians.–The Economist

Print edition | Leaders

WHEN George H.W. Bush lost his presidency after four years in office, he blamed Alan Greenspan for not cutting interest rates fast enough in an election year. “I reappointed him, and he disappointed me,” said Mr Bush of the Federal Reserve chairman. Janet Yellen cannot now be a let-down to President Donald Trump. She chaired her last meeting of the Fed’s rate-setting committee this week; her successor, Jerome Powell, will serve beyond the next presidential election. On both counts—the change at the top and the type of replacement—America is setting a lead that others are likely to follow.

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Fed Chairman Jerome ‘Jay’ Powell

The guard may be about to change at other central banks, too. Haruhiko Kuroda, boss of the Bank of Japan, must be reappointed or replaced by April. Zhou Xiaochuan is expected to step down as governor of the People’s Bank of China after 15 years (see article). Big changes are coming at the European Central Bank (ECB). The eight-year term of its vice-president, Vitor Constancio, expires in May. His is one of four jobs on the ECB’s six-strong executive board, including the top post held by Mario Draghi, which are up for grabs in the next two years.

The signs are that central bankers of Ms Yellen’s kind (nurtured in academia, immersed in economic models, aloof from politics) are out of favour.  The new central-bank bosses will probably, like Mr Powell, be generalists versed in the ways of government and masters of a brief rather than a theory. They are set, in short, to be more agreeable to politicians.

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https://www.thebalance.com/what-is-the-central-bank-315194

It is natural for politicians to want to hug central bankers closer. The bankers’ powers have grown since the financial crisis of 2007-08 in part because governments have themselves been unable or unwilling to act. Central banks kept credit markets working, bailed out banks and gave confidence to shaky bond markets. They have since been given, or been given back, powers to regulate banks and to preserve financial stability.

The politicians’ instinct to appoint one of their own will be amplified in Europe by the usual horse-trading among euro-zone members. Spain believes it is high time it got a top ECB job, and is claiming the vice-presidency. Were a Spaniard to be appointed, it might imply Mr Draghi’s job will go to a northern European (though perhaps not to a German) to preserve balance between the euro zone’s core and periphery. France will lose one post, so must gain another. And so on. It is unlikely that someone with the qualities of Ms Yellen or Mr Draghi will emerge from such a messy process.

The decline of the pointy-headed central-bank governor need not be calamitous. Mr Zhou has been influential on a broad range of economic reforms even though—or, perhaps, because—the People’s Bank of China does not have autonomy over monetary policy. Independence can sometimes be a trap.  Until Mr Kuroda was appointed in 2013 as its boss, with the express backing of Shinzo Abe, the Prime Minister, the Bank of Japan was loth to fight deflation aggressively in part because it feared it would compromise its independence.

All over bar the Yellen

Image result for Thank You Janet YellenThank You, Dr. Janet Yellen for your steady hand as Fed Chairman

 

Yet there is also good reason to worry. An independent central bank can be better trusted to act swiftly to curb inflation. That trust also gives it freedom to cut interest rates when the economy turns down. The kinds of problems set by a booming world economy and elevated asset prices (see article) are best tackled by experts at some distance from politics. What central banks need is not the appointment of officials who are less inclined to disappoint their political masters. It is new thinking about how to make over mighty central banks more accountable to electorates, while at the same time shielding them from day-to-day political pressure.

This article appeared in the Leaders section of the print edition under the headline “Changing of the guard”