I have to leave it to EU legal scholars to determine the legality of Draghi’s involvement with the G30, but a cursory look at the situation reveals that Draghi isn’t the first member of the G30 to be the President of the European Central Bank concurrently. Jean Claude Trichet was involved with the group from at least 2007 while President of the ECB. It wasn’t a big deal then, but as reported by CNBC today, a complaint has been filed against Draghi alleging a conflict of interest regarding his involvement with the group that would endanger the independence of the ECB.
What they say here, and I am sure that it applies to European politics as well, “If you’re getting a lot of flack, you know you’re over the target.” In my opinion Draghi is merely getting warmer, from ice cold to tepid, but he surely is going in the right direction and may actually hit upon using NGDPLT as the target sooner rather than later considering that he is now being fingered for a scandal.
It appears as if someone certainly has much invested in the status quo, but if it is determined that there is a problem with Draghi’s involvement in the G30, it might also put a lid on involvement with other groups as well. It’s not so much of a secret that central bank independence is only a theory given the evidence I dug up that they can’t even speak for themselves let alone have an independent thought, which is quite a dangerous predicament considering the economic power vested in each without any democratic accountability.
The condition of having too tightly integrated central bank monetary policies in the developed economies only guarantees that a policy failure in one will result in policy failure in all with just a little tweaking around the edges in various geographies. We can see it happening now from Japan to Europe to the United States. If being involved in a consortium of economic leaders is a conflict of interest that threatens independence, having BIS or some other institution impose policy conformity from afar is an even larger threat not only to central bank independence, but also to the people living with the policies and to their democratic institutions. And I think this accusation against Draghi is something that could backfire on those who wish to maintain the slow motion train wreck that is the euro by setting the proper bounds in order to establish true independence.
Only in my dreams Congress would step in and break some of those links between the Fed and other international institutions. If it did, we might have some chance to convince Bernanke to make appropriate changes to monetary policy. As it is now, however, we have to convince the entire world of central bankers that their chosen object of conformity, inflation ceilings, is quite wrong. It is a kind of tyranny that should never have been foisted on the free world and certainly not replicated in the US. There is almost nothing we can do about it until Mr. Bernanke himself decides that we’ve had enough.
We will know tomorrow whether Bernanke will stand up for central bank independence and end the financial suffering of the average American that has resulted from central bank group think. I am not holding my breath, but I certainly hope to see some improvement over the current circumstances.