Unelected European Commission tells elected Hungarian government to change policy

It's authoritarianism all around in Europe!
European Body Threatens to Sue Hungary Over Its Policies
“The commission recalls that a legally stable environment, based on the rule of law, including respect for media freedom, democratic principles and fundamental rights, is also the best guarantee for citizens’ trust and confidence of partners and investors,” the European Commission’s warning said. “This is particularly vital in times of economic crisis. The swiftest way to lay to rest the concerns mentioned would of course be action by the Hungarian authorities themselves.”
Hungary has a lot of policies worthy of criticism, but ending central bank independence is not one of them. As we've seen through history, including twice in the United States, central banks are killed off periodically due to historic mistrust of banks and their role in financial crises, which tend to damage an economy for years if not decades (certainly decades from the standpoint of asset prices). Hungary may well use political control over the central bank to usher in another era of hyperinflation, but it may also rein in the excesses of the past two decades. In any event, socionomics tells us central bank independence is on the way out, a prediction supported by the history of banking, central banks and fiat currencies.

The frame of the story should be broken to understand it. The media is focused on the wrong issues. Yes, Hungary's right-wing government has troublesome policies and they certainly appear headed in a bad direction. However, their government is elected. The European Commission and central banks are not elected. Central banking played a central role in the crisis and one reason why Hungary is being attacked strongly is because its actions are very anti-bank. This is a banking story and an economic policy story, not a question of politics. The two are intertwined because of the nature of events, but the strong pressure on Hungary is driven by the banks, not their right-wing politics.

From Sepetmber 2011: Hungary to Force Banks to Foot Franc Losses, Irking Austria
Hungary wants to allow fixing the Swiss franc at more than 20 percent below market rates for early repayment, Prime Minister Viktor Orban said today in parliament. Austria “firmly rejects” the measure, which may cause “enormous losses” to banks and risks regional financial stability, Finance Minister Maria Fekter said today. Erste Group Bank AG (EBS) and Raiffeisen Bank International AG (RBI) dropped, while Hungary’s risk rose.
It tells foreign banks that they can go to hell, which in the long run is extremely negative,” Daniel Bebesy, who helps oversee $1.5 billion mostly in Hungarian government bonds at Budapest Investment Management, said in a telephone interview.
And then in December 2011: Erste Bank of Austria Sends Risk Head to Hungary Following Mortgage Losses
Erste Group Bank AG (EBS), eastern Europe’s second-biggest bank, is sending Bernhard Spalt, chief risk officer, to Hungary as bad debts soared following a government decision forcing banks to swallow mortgage losses.
Spalt will take over risk management at Erste Bank Hungary Zrt., the nation’s second-biggest lender, from Feb. 1, the Vienna-based bank said in a statement today. The position had been vacant since the summer.
The lender set aside 701 million euros ($912 million) in the nine months to Sept. 30 to cover bad loans in Hungary following Prime Minister Viktor Orban’s foreign-currency mortgage law passed in September. The provision is almost four times the 180 million euros the bank set aside for souring loans in Hungary in the same period of last year.
Yes, there is concern about Hungary's right-wing populism, but the real concern is the banks! And on this issue, the trend in social mood is Hungary's friend. The government is pursuing a double-win policy: anti-foreigner, anti-bank. Foreign attacks may help the government stay in power and achieve victory, whereas during rising social mood it probably would doom the efforts and lead to electoral losses.

Hungary is also on the right track economically because the banking sector needs serious reform. Ron Paul's approach in the United States is a far better one because seeks competition in the monetary system rather than political control over banking decisions, but Hungary's potentially bad policy is better than continuing with the existing failed policy that the European Commission, IMF and others are trying to shove down their throat.

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