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It happened in 1958 (it may have been '56, my memory is poor), and 1920-1. In the case of the Fed, the last central banker to take this approach was Martin in t

It happened in 1958 (it may have been '56, my memory is poor), and 1920-1. In the case of the Fed, the last central banker to take this approach was Martin in the 1960s ("leaning against the wind")...and his legacy ended up being inflation. You are basically correct but these factors are essentially structural. For example: is the central bank independent from the govt? How much oversight is there over policy decisions? Etc. In the West, it has been politically impossible to actually do this. Your understanding of early 1990s Britain is not correct. The UK was forced to raise rates because of the ERM and rising inflation. The govt ran the BoE so it should be quite obvious that they had no desire to slow the economy down but were forced to do so.

H8crilA 7y ago
They wanted high rates because ERM was the main policy goal of the prime minister. Super high rates were also choking the economy. It was a choice between ERM and easier recession, and the breakage of the pound forced them to no ERM and easier recession. The bundesbank was the one to put the final nail in the UK Euro coffin. Also, this is not about the FED being dependent or independent from the government. This is about the widespread idiocy of thinking that expensive assets = well-being of the country. Dotcom and 2008 (and today, but let's wait for it to burst first) are all FED's pedal-to-the-metal work.
- hogFeast 7y ago
  > They wanted high rates because ERM was the main policy goal of the prime minister. Again: no they didn't. They didn't "want" high rates. You understand how dependent the Conservatives were on home owners and the structure of UK mortgages? The reason ERM was the main policy goal of Major was inflation. The Bundesbank was the immediate cause but the reason they got into that position was inflation (if you read the research, even the die-hard Lawson fans believe that the ERM set the stage for the 1990s). Yes, the nature of the relationship between the central bank and the govt determines the response to those events. Do you realize that there have been substantial changes in this relationship since the Fed was created? The Fed is politically unable to respond. I don't understand the relevance of your point about expensive assets...that determines nothing, the market will go up and down regardless of anything.

H8crilA 7y ago

They wanted high rates because ERM was the main policy goal of the prime minister. Super high rates were also choking the economy. It was a choice between ERM and easier recession, and the breakage of the pound forced them to no ERM and easier recession. The bundesbank was the one to put the final nail in the UK Euro coffin. Also, this is not about the FED being dependent or independent from the government. This is about the widespread idiocy of thinking that expensive assets = well-being of the country. Dotcom and 2008 (and today, but let's wait for it to burst first) are all FED's pedal-to-the-metal work.

hogFeast 7y ago
> They wanted high rates because ERM was the main policy goal of the prime minister. Again: no they didn't. They didn't "want" high rates. You understand how dependent the Conservatives were on home owners and the structure of UK mortgages? The reason ERM was the main policy goal of Major was inflation. The Bundesbank was the immediate cause but the reason they got into that position was inflation (if you read the research, even the die-hard Lawson fans believe that the ERM set the stage for the 1990s). Yes, the nature of the relationship between the central bank and the govt determines the response to those events. Do you realize that there have been substantial changes in this relationship since the Fed was created? The Fed is politically unable to respond. I don't understand the relevance of your point about expensive assets...that determines nothing, the market will go up and down regardless of anything.