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FINANCIAL MARKETS REDUCE MONETARY POLICY TO A FARCE
New Delhi, Jan. 11 -- In November, Viral Acharya, one of the deputy governors of the Reserve Bank of India, had warned the government of India not to incur the wrath of the financial markets. He has been proven right, but with a twist. First, the wrath of the financial markets has not visited India. It has visited the United States. Even there, it has not been felt by the government but by the Federal Reserve. Therein lies the problem of invoking the financial markets to enforce policy discipline. Financial markets do not discipline policymakers, but they capture them, especially if they are central bankers. Last week, reacting to the tantrums of the schizophrenic stock market in America, Jerome Powell, the chairman of the Federal Reserve, ...
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