From the Department of About F%$#ing Time

People are finally beginning to question the wisdom of outsourcing the whole of monetary policy to a bunch of unelected bankers.

Even if said bankers are not corrupt (and a lot of them are very corrupt, see here, here, here, here, and here), they are bankers, which means that the preconceptions of big finance drive their decisions, which is detrimental to the economy and the vast bulk of the population.

We've had 50 years of central bankers as masters of the universe, and we have had falling wages, an economy increasingly divorced from actual productive works, rent-seeking, and corruption:

Three weeks ago, Sanna Marin, Finland’s prime minister, retweeted a link to an article by a Finnish academic together with the following quote: “There is something seriously wrong with the prevailing ideas of monetary policy when central banks protect their credibility by driving economies into recession.”

Defenders of those prevailing ideas predictably pushed back, warning against second-guessing independent central banks or not valuing their credibility. But defensiveness is the wrong response. Not just because Marin didn’t actually criticise any central bank actions. But, more profoundly, because avoiding a debate over whether our macroeconomic regime is fit for purpose is more perilous than having one.

Comparisons with the 1970s often fail to notice one important lesson of that decade: a macroeconomic regime that cannot justify itself will be toppled, first intellectually, then politically. It was from the ashes of 1970s monetary chaos that theories were born justifying independent central banks with a mandate to keep inflation low. Before the century was out, independent inflation-targeting was de rigueur in most advanced economies.

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With cost of living crises biting and recessions looming in key advanced economies, what are the odds of avoiding a more profound reckoning for much longer? Marin is not the only national leader expressing unease about central banks. French president Emmanuel Macron recently worried aloud about “experts and European monetary policymakers telling us we must crush European demand to contain inflation better”.

Even with relatively few central banks that have dual charges, like the Federal Reserve which is charged to both maximize employment and minimize inflation, maximizing economic well being is defined as making sure that Wall Street and the City of London are insulated from the consequences of their actions.

One of the problems with government by experts is that these experts are often incapable seeing beyond people like themselves.

This is why politics needs to be a part of these sort of decision, because having an economy run by bankers for bankers does not work for anyone but bankers.