Picture this: you have a small group of people in suits that have the power to manipulate the economy, destroy a 70-year-old retiree’s savings, enable a government to spend without fiscal restraint, and send a nation to war. This isn’t some secret society emanating from a dystopian novel or the mind of Alex Jones. This is the central banking system, whether it’s the Federal Reserve or European Central Bank.
In the fallout of the global economic collapse, without any oversight or accountability, central bankers have metastasized into omnipotent beings, wielding power never seen before.
Around the world, central banks have utilized unconventional means to bail out financial institutions, stimulate the economy, and help governments go deeper into debt. These irregular tools have merely kicked the can down the road, proffering short-term relief that masks our inevitable long-term horrors. Washington, Brussels, and Tokyo have exacerbated our financial nightmare that will make the Great Recession a picnic.
In the midst of the populist revolution, we have misdirected our anger, our frustrations, our disdain to politicians. Our esteemed representatives are merely spokes on a grand wheel that get shifted around from election to election. Central banks are permanent entities that are free to wreak havoc on nations as the fractured populace quarrel over tweets, kneeling, and fake news.
But the central banking elite fear that their independence is the next target of our collective scorn.
Feeling Sorry for Central Banks
Paul Tucker, former deputy governor at the Bank of England (BOE), believes that the all too powerful monetary policy makers are exercising too much authority, which could leave them vulnerable to a nationwide or international backlash amid the next financial crisis.
Speaking in an interview with MarketWatch, and writing in Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, Tucker opines that the next conversation that’s going to take place is the role unelected central bankers play in today’s democracy. This could happen quite soon, he warns.
Tucker is concerned that the central banks are going to be blamed for the next recession or major economic downturn. He is also worried that politicians will start demanding central banks to take into account political factors when they are determining monetary policy.
These are strange anxieties for two reasons. First, these bodies should be blamed for the boom-bust cycle. Second, they already take their marching orders from power-hungry administrations and reckless politicians and mull over political environments.
Despite his defense of the Fed, the Bank of Japan (BOJ), and the BOE, Tucker does advocate for heightened accountability.
That said, he is overall optimistic about the future of central banks, telling the website:
“I am optimistic in slow motion. One of the things I discovered in public life was that if you have long horizons and your arguments are good and you adapt your arguments if you meet better arguments in public debate, then shifts can occur.”
Should we start feeling pity for the likes of Mario Draghi, Haruhiko Kuroda, and Jerome Powell?
Questioning Their Independence
The Fed, the ECB, the Bank of Canada. They are not beholden to the average student, retiree, or middle-class household. For years, they have run roughshod with very little oversight from leaders, only because these same officials benefit from a central bank that’s a friend, not a foe.
Kevin Warsh, a former Fed governor and President Donald Trump’s top candidate to be the chief occupant of the Fed, recently remarked that Trump does not accept its neutrality. This prompted Fed Chair Jerome Powell to stress the importance of Fed independence, despite a paucity of public confidence.
It has been highlighted throughout history just how 1600 Pennsylvania Avenue and the Eccles Building have worked together, whether it’s a Republican or a Democrat in charge. William Martin and John F. Kennedy, Arthur Burns and Richard Nixon, Ben Bernanke and Barack Obama, there have been many tag teams over the last 100 years. And the tradition will continue with President Trump and Jerome Powell.
Now some on the left may pronounce their disapproval of a particular central bank, suggesting that politicians should determine interest rates and the right money supply. This would be a disaster – imagine Senator Elizabeth Warren (D-MA) or socialist Jeremy Corbyn running the printing press! Other leftists only oppose central banks when they’re not the ones in charge, or when they’re too white.
If populists really want to send a message to the elite, then here is a policy prescription: advocate to abolish the central banks, don’t just change those at the helm. Without this weapon of mass destruction, a free market can set rates, the marketplace can enable competing currencies, and the economy wouldn’t endure prolonged recessions and depressions. Kicking out the unelected elite sends a true message to the iniquitous swamp, not relying on an elected temporary ally to cure our woes.
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