Some central banking wings have been clipped over the past couple of weeks. The censure of the Reserve Bank of New Zealand was particularly striking, and may well reverberate beyond the Shaky Isles next year.

To be sure, Robertson also requested that Treasury report back before year end on alternative demand and supply initiatives to cool the housing market.
But make no mistake, this was an elected official with a direct takedown of a central bank.
Mnuchins parting gift
Interestingly, this was the second time in a week.
On the preceding Thursday, US Treasury Secretary, Steven Mnuchin, who is appointed rather than elected, wrote a public letter to the Chair of the Federal Reserve, Jerome Powell, that effectively pulled the funding from a series of lending programs that were established under the CARES Act.
The Fed responded initially by saying it would prefer the full suite of pandemic measures to remain in place as a backstop. Powell then wrote a conciliatory letter, confirming that the Fed would return the unused capital to Treasury, and that the facilities would terminate at year end.
There remains an active debate as to why Mnuchin made this move. Bidens transition team called it deeply irresponsible. And Senator Ron Wyden, who ranks for Democrats on the Senate Finance Committee, spoke of economic sabotage.
In contrast, we think it is a sound policy, even if there is a strong element of Trumpian pique.
The facilities in question were barely used (the total lending extended was in the region of $18 billion), and global credit markets remain excessively supported by the unconventional monetary policy measures that have been deployed.
The facilities were also significantly over-collateralised by Treasury. This enabled Mnuchin to deftly highlight that $455 billion could be re-appropriated by Congress for other purposes.
“Central bankers of all stripes would be well advised to heed the cautionary tale of the RBNZ.”
The rider is that Treasury has confirmed an intention to credit its General Fund, rather than the Exchange Stabilization Fund (where incoming Treasury Secretary Janet Yellen will have more discretion).
The decision also adds another wrinkle to the negotiations over the Continuing Resolution required to avert a government shutdown beyond December 11.
Nothing is ever simple in DC.
Still, at a big picture level, we think it is perfectly reasonable to deploy what should be viewed as scarce fiscal capacity away from underutilised lending programs for other purposes.
And it was refreshing to see the Treasury Secretary make that call, even without the support of the Fed.
Autonomous, not independent
The two dots should not be joined too tightly.
Robertson and Mnuchin had different motivations, both in terms of economics and politics.
However it was striking to see two senior cabinet officials, operating at the entire opposing ends of the political spectrum, clip the wings of their respective central banks, and to do so in public.
It serves as a reminder that for all their claims of independence, central banks are better viewed as autonomous.
The IMF draws this distinction as follows: autonomy is sometimes preferred to the frequently used term independence, as autonomy entails operational freedom, while independence indicates a lack of institutional constraints.
In an environment where central banks have dramatically increased their involvement in global capital markets, and by doing so, have altered economic outcomes both in the aggregate and as between different stakeholders, it is all the more important that institutional constraints are recognised, and that accountability is holistically maintained.
This promotes credibility, and mitigates against the risk of central bankers being perceived as philosopher kings, handing down wisdom to elected officials and citizens at large (only 14 of the worlds 173 central banks are run by women).
Central bank activism
Looking ahead, the RBNZ should be aware that its response to Robertsons missive is going to be very carefully scrutinised, and all over the world.
The proximity of a vaccine for COVID-19 has fully vindicated Jacinda Arderns strategy of elimination, with New Zealand emerging both as a global posterchild and as a cyclically leading economy.
Meanwhile, work from home protocols having created a durable and global bid for housing, one which has been amplified by central bank easing, both in terms of monetary accommodation and macro prudential regulations.
In Australia, while the housing market did at least pullback, there is a lot of fuel beneath the recovery. The changes to stamp duty in NSW are a significant reform. And the Governments initiative to overhaul the National Consumer Credit Act (ie the responsible lending rules) is important, even if it faces a journey ahead in the Senate.
The RBA will let its own much more circumspect experiment run, but will surely become attendant to the unintended consequences of large scale asset purchases, that the FOMC referred to this week in its minutes.
Central bankers of all stripes would be well advised to heed the cautionary tale of the RBNZ, and recognise that there are limits to central bank activism.