MY son, money is not the most important thing in life, its the amount” a Caucasian father teaches to his son. In economics, it’s also true.
The amount of money circulating in the economy of any country is controlled by two means. One approach is a budget policy and the other is a monetary policy.
The budget policy is implemented by the government through the state budget. The government collects the revenue for the state budget from a number of sources; such as individual income tax, cooperative profits, real estates taxes, excise taxes on vodka and tobacco, etc. Then it provides services for public consumption and thus disposes of the state budget in this way. These actions affect the amount of money in an economy and its circulation. It can also be used as political propaganda by the government that was formed from the political party that won an election in a democratic state.
The second approach is one which must be kept away from politicians, because it’s a weapon which must only be possessed by professional people who can implement a far-seeing policy long past the election terms of any politician. Only in a country that can implement such monetary policies as mentioned above, can its economy can go in a relatively proper direction, and inflation can be limited.
Every country with successful economic progress has followed the principles of implementing these two policies, and keeping them separated, and they have laws in place supporting this trend. Our current political regime, which so easily takes the law into their own hands, has made the central MongolBank management, a major objective for a long time. Their latest move demonstrates this is in full swing.
The Mongolbank has two vice presidents and both have recently submitted their requests for dismissal, simultaneously – one is for “health reasons”. This is a very curious coincidence. “The most interesting thing about it, is what made these vice presidents apply for dismissal at the same time”. Before the two deputies finished writing their petitions for dismissal, the two ruling parties had already started to play out their usual ”drama”. The two parties each nominated their own men by holding the central bank’s boss accountable.
We Mongolians must analyze the reasons and subsequent consequences of such actions. Actions which makes it clearer that politicians just completely seized the monetary policy to control the budget policy. The most unfortunate and unfair thing is that we, the citizens, pay for all the costs of this game through inflation, and all of the benefits of the game go to the two political parties, being spent for building big luxury houses, travelling and undertaking treatments abroad.
Such a poorly-produced political drama is performed by some people who hold the power of Mongolian state, alternately, and is the expression of their personal interests for power. Their political weapon is the cash and its circulation (M1). They control all the money in circulation (M2 or M1+ savings) through commercial banks, which they own. Through the Central Bank, only they are the ones who decide which commercial bank must be inspected, how they must be inspected, which of their mistakes must be exposed or not exposed, how much money must be kept at the Central Bank as a reserve, and what interest rates should be for Central Bank securities purchased only by commercial banks. It is possible for them to control and regulate all these just by putting only their men at the top of the Central Bank. At least, they’re able to know what the other party is going to take before it’s taken. By controlling the money circulation, they can give the cash promised during election campaigns to people, (of course reducing the originally-promised amount), and then on the other hand, find it a useful way to establish and measure the real volume of the big cake they divvy up.
Such politicizing of monetary policy exerts a critical impact to the amount of money – the main provider for economic turnover, and is at best, a risky step which causes inflation. The normal (or ideallic) rate of inflation is 2-3 percent per year and economists claim that any growth exceeding this rate means the government is stealing money from its citizens. In order to prevent this inflation, which is the strongest enemy of economy monetary policy, it must be isolated from politicians.
In most developed countries, the supreme management of the central bank is controlled by its Governing Board. This Governing Board defines long-term monetary policy for the country. Members of the board must meet criterions of qualifications, have professional experience, knowledge and ethics, and they are appointed for many years. For instance, in the U.S.A, each of the seven members of the Governing Board is appointed by the president for a term of twelve years, without the right for renewal.
In the case of Mongolbank, all members are appointed by the MongolBank president and the current Governing Board comprises of department heads and two teachers. Of them, only the two vice presidents are approved by parliament, and you see how they make approvals. In our country where such a ceremonial, and superficial Governing Board is appointed by only a few people in the name of their political parties, the dismissal and replacement of central bank heads and deputies have more impact than the replacement of a sectoral minister.
The only thing they can do is to issue loans with interest rates, the likes of which exist nowhere else in the world, and force non-political, ordinary businesses to pay the high costs of the loan, thereby extracting all the juice out of them. Isn’t it a major anomalism of our banking system in which big creditors are linked with politicians, that they can simply force the non-performing banks, for which they are liable, to be closed with the help of politicians, instead of paying off their debts, hiding inside this puppet bank?
It is time to think about ensuring the independent activity of a central bank in a new, more effective way, and make the changes necessary to make this happen.
The amount of money circulating in the economy of any country is controlled by two means. One approach is a budget policy and the other is a monetary policy.
The budget policy is implemented by the government through the state budget. The government collects the revenue for the state budget from a number of sources; such as individual income tax, cooperative profits, real estates taxes, excise taxes on vodka and tobacco, etc. Then it provides services for public consumption and thus disposes of the state budget in this way. These actions affect the amount of money in an economy and its circulation. It can also be used as political propaganda by the government that was formed from the political party that won an election in a democratic state.
The second approach is one which must be kept away from politicians, because it’s a weapon which must only be possessed by professional people who can implement a far-seeing policy long past the election terms of any politician. Only in a country that can implement such monetary policies as mentioned above, can its economy can go in a relatively proper direction, and inflation can be limited.
Every country with successful economic progress has followed the principles of implementing these two policies, and keeping them separated, and they have laws in place supporting this trend. Our current political regime, which so easily takes the law into their own hands, has made the central MongolBank management, a major objective for a long time. Their latest move demonstrates this is in full swing.
The Mongolbank has two vice presidents and both have recently submitted their requests for dismissal, simultaneously – one is for “health reasons”. This is a very curious coincidence. “The most interesting thing about it, is what made these vice presidents apply for dismissal at the same time”. Before the two deputies finished writing their petitions for dismissal, the two ruling parties had already started to play out their usual ”drama”. The two parties each nominated their own men by holding the central bank’s boss accountable.
We Mongolians must analyze the reasons and subsequent consequences of such actions. Actions which makes it clearer that politicians just completely seized the monetary policy to control the budget policy. The most unfortunate and unfair thing is that we, the citizens, pay for all the costs of this game through inflation, and all of the benefits of the game go to the two political parties, being spent for building big luxury houses, travelling and undertaking treatments abroad.
Such a poorly-produced political drama is performed by some people who hold the power of Mongolian state, alternately, and is the expression of their personal interests for power. Their political weapon is the cash and its circulation (M1). They control all the money in circulation (M2 or M1+ savings) through commercial banks, which they own. Through the Central Bank, only they are the ones who decide which commercial bank must be inspected, how they must be inspected, which of their mistakes must be exposed or not exposed, how much money must be kept at the Central Bank as a reserve, and what interest rates should be for Central Bank securities purchased only by commercial banks. It is possible for them to control and regulate all these just by putting only their men at the top of the Central Bank. At least, they’re able to know what the other party is going to take before it’s taken. By controlling the money circulation, they can give the cash promised during election campaigns to people, (of course reducing the originally-promised amount), and then on the other hand, find it a useful way to establish and measure the real volume of the big cake they divvy up.
Such politicizing of monetary policy exerts a critical impact to the amount of money – the main provider for economic turnover, and is at best, a risky step which causes inflation. The normal (or ideallic) rate of inflation is 2-3 percent per year and economists claim that any growth exceeding this rate means the government is stealing money from its citizens. In order to prevent this inflation, which is the strongest enemy of economy monetary policy, it must be isolated from politicians.
In most developed countries, the supreme management of the central bank is controlled by its Governing Board. This Governing Board defines long-term monetary policy for the country. Members of the board must meet criterions of qualifications, have professional experience, knowledge and ethics, and they are appointed for many years. For instance, in the U.S.A, each of the seven members of the Governing Board is appointed by the president for a term of twelve years, without the right for renewal.
In the case of Mongolbank, all members are appointed by the MongolBank president and the current Governing Board comprises of department heads and two teachers. Of them, only the two vice presidents are approved by parliament, and you see how they make approvals. In our country where such a ceremonial, and superficial Governing Board is appointed by only a few people in the name of their political parties, the dismissal and replacement of central bank heads and deputies have more impact than the replacement of a sectoral minister.
The only thing they can do is to issue loans with interest rates, the likes of which exist nowhere else in the world, and force non-political, ordinary businesses to pay the high costs of the loan, thereby extracting all the juice out of them. Isn’t it a major anomalism of our banking system in which big creditors are linked with politicians, that they can simply force the non-performing banks, for which they are liable, to be closed with the help of politicians, instead of paying off their debts, hiding inside this puppet bank?
It is time to think about ensuring the independent activity of a central bank in a new, more effective way, and make the changes necessary to make this happen.
huuliin tusul bolowsruulj ulsiin ih hurald oruuldag NGO baiguulj bolohgui yuu? tegeed olon niitiin demjlegteigeer heleltsuuleh batluulah? Odoogiin baidlaar gishuud or horood l tusul bolowsruulj uursduu buyuu uursduduu ashigtai huwilbariig batalj baina. Manai irged dund uls tur bolon ediin zasgiin medleg undurtei, shinechlel hiihiig husej bui humuus nileedgui baigaa gej bodoj baina. Tedgeer humuusiin demjlegteigeer tsuglaan jagsaal hiih bish, harin ul suuritai bodlogo zarchimiin sanal bolowsruulah olon niited taniulah, olon niitiin hyanaltiig togtooh ajliig ehluuleh tsag n bolson sanagddag um.
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