Removing monetary policy from democratic political control was perhaps the most important financial norm change of the 70s. Monetary policy was handed to experts (economists), whose mandate was to keep headline inflation low (no matter what) & growth steady (if possible). Thread:
Complex story, but in short: from the late 70s, states created “independent” central banks with the goal of depoliticizing monetary policy so that politicians could deflect responsibility for the disinflationary policies which inflict pain on workers, the poor & the indebted.
Hard money has been a cornerstone of the so-called neoliberal political-economic order: Capital owners get monetary stability and politicians get to blame the bond market for imposing painful choices. The rightful hegemony of asset owners becomes literally hors de question.
Since the 70s, every appointee to the Fed and its analogs (ECB, BofE, BoJ, etc) has subscribed to & promoted the hard money orthodoxy with an ideological firmness a Stalinist would have found disquietingly familiar. Debates have focused almost exclusively on means, not ends.
😡’s recent nominations of a couple of dingbats to the Fed may well herald an end to this ideological and institutional order. Financial ignorami, Moore and Cain have neither any apparent fealty to the stable money order nor the competence to promote it.
But rather than being aghast over another busted norm, consider what the old order brought: not mass prosperity but rather runaway asset price inflation, wage stagnation & the explosion of inequality. If it is dying, it’s hard to shed many tears for its loss.
As always with 😡, his motives are bad and he lacks any strategy. He picked Moore and Cain not because he *intends* to dismantle the stable money order — to do that he would have picked competent dismantlers. He presumably picked them for reasons of personalistic loyalty alone.
But still!
One of the great, general lessons of history is that the meaning of important historical acts very frequently exceed the intentions of their authors. In that light, might the re-politicization of monetary policy not be a welcome thing?
Because if 😡 can appoint loyalist doofi like Cain and Moore to the Fed, it opens the door to all sorts of other (better!) political possibilities.
If the viable candidates are no longer limited to bond-market approved hard money zealots, consider the kinds of people who a POTUS @ewarren or @AOC might appoint to the Fed.
In short, what the Cain and Moore nominations signal is that no longer must we be limited to the hard-money neoliberal dismal scientists who have dominated the Federal Reserve Bank since 1979. And that, in the end, could be a good thing!
Moments of historical crisis frequently turn out to be, in retrospect, moments of institutional renewal. Perhaps it’s too soon to voice this optimism, but maybe in the final analysis 😡 will be seen as a wrecking ball who cleared the decks for an altogether better system. /end
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