The deterioration of political relations between Western states, and between governments and their central banks, is taking place with disturbing rapidity. It is quite amazing that in 2011 the US Secretary of the Treasury can so openly discuss how European governments are at war with the ECB. A few years ago this would have been inconceivable.
And this is before really serious inflation problems have gripped. That is to say, more difficult days may lie in wait.
Even in superficially protected isles like Australia we are seeing a worryingly similar pattern with the politicisation of central banking, and thus a diminished commitment to preserving the value of money. Full credit to the journalistic and editorial teams at the AFR, particularly, and The Australian, for standing shoulder-to-shoulder with me in attempting to resist this. Here is Tim Geithner in the FT today:
““What is very damaging [in Europe] from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict between governments and the central bank, and you need both to work together to do what is essential to the resolution of any crisis,” Mr Geithner said on the sidelines of a meeting of eurozone finance ministers in Wroclaw, Poland on Friday.
“Governments and central banks have to take out the catastrophic risk from markets… [and avoid] loose talk about dismantling the institutions of the euro,” he added...
“I found it peculiar that even though the Americans have significantly worse fundamental data than the eurozone, that they tell us what we should do and when we make a suggestion ... that they say no straight away,” said Maria Fekter, Austria’s finance minister.”
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