Wednesday, February 6, 2008
An open letter to Kevin Rudd
Dear Mr. Rudd,
With interest rates going up and further rises forecast, the Reserve Bank certainly seems to be in the news recently. We witness discussion after discussion circling the topic but we never quite get to the centre of it. I'm wondering if I might ask you to clear some things up for me.
In your campaign commercials you brought up the topic of the Reserve. You swore to uphold its independence. Why did you do this? Surely these commercials were dedicated to convincing voters that you would address their concerns and thus that they should vote for you. These concerns are expressed in party meetings, letters and phone calls from constituents, and polls and research. Given that your advertising dollar is limited the party selects the most important of these concerns and packages them into an ad. I imagine in thirty seconds one might sensibly address perhaps half a dozen topics. Money aside, to address too many topics dissipates the message and only serves to confuse.
One has to assume that you and your advisers were of the opinion that voters were particularly concerned about the Reserve Bank's independence. This is astounding. In my travels, I've never heard a single person express such a thought, nor anything like. Sure, they're concerned about interest rates but how does this translate to wanting the Reserve Bank to remain independent? Does anyone get the connection? If voters stopped and thought about it, wouldn't they merely be scratching their heads?
Independent? Under whom? The government doesn't control the Reserve? Why not? Given the sine qua non ability of the Reserve to control our economy through monetary policy why shouldn't we control it through our elected representatives? Do we not own it? Is it not ours? Whose is it? Who owns the Reserve Bank? Why are successive governments reduced to pleading with it? What is this independence? Whom does it serve? Why do we imagine that people acting in a perfectely opaque manner, free of censure, act in our interests?
The interest rate the Reserve charges is for the money it puts into our economy. Why do we pay interest on our money? Isn't it ours? To whom does the interest go? And why does it exist at all? If we wished to control inflation why wouldn't we control our own money supply and simply print less of it? Or withdraw some of it as it entered the banks? Or perhaps, most crucially, print less of it to begin with? Why do we leave it to an 'independent' body to print as much as they like and then control the resulting inflation cycle by making us pay more for it? What sort of crummy mechanism is this?
Just yesterday, you said you would do everything in your power to control inflation. Would I be right in thinking that addressing the sanctity of the Reserve Bank's position of primacy is not within your power? What am I as a voter to think of this? It seems that not only may you not do anything about it, but you may not even discuss it. Astounding! What is the purpose of Government if something as singularly crucial as our own currency is not under our control? Who controls whom, here? And who were you addressing when you said you would ensure the independence of the Reserve Bank? The voters? Or the people who control the Reserve Bank? In whose interests are you working?