Just How Much Control Over Central Banks Do The People Have?

Formal central bank independence is increasingly under pressure as societal preferences for a lender of last resort savior grow ever stronger (and more priced into nominal risk markets) as do demands for politicizing the monetary authorities under the pretext that they should more politically independent. Morgan Stanley takes on the question of constitutionality among the G3 Central Banks and rather unsurprisingly finds the mandates, targets, and prohibition treaties to be 'flexible' at best and 'practically meaningless' at worst. We-the-people appear to have little if any remit to constrain - even if our collective call for more printing leads to 'be careful what you wish for' reactions, as Michael Cembalest noted yesterday, "first prize in the Central Bank balance sheet expansion race is not necessarily one you want to win".

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