Can Truss Be Trusted with the Bank of England?
Liz Truss, vying to succeed Boris Johnson as the United Kingdom’s prime minister, is addressing the central-banking part of Britain’s macroeconomic problem honestly. But whether a Truss government would have the courage to follow through on fiscal consolidation remains to be seen.
PRINCETON – The Conservative Party contest to succeed Boris Johnson as prime minister of the United Kingdom has touched on a principal component of modern political economy: central banks. Monetary policymakers, who in the 2010s could seemingly do no wrong, are increasingly under fire. All the old rhetoric about their illegitimate influence is returning to the fore.
Both contenders for the premiership, former Chancellor of the Exchequer Rishi Sunak and Foreign Secretary Liz Truss, have adopted oddly nostalgic platforms in an effort to claim the mantle of former Prime Minister Margaret Thatcher. While Sunak launched his campaign in Grantham, Thatcher’s birthplace, Truss (the likely winner) misses no opportunity to portray herself as the Iron Lady reincarnated, not least by starting a high-profile fight with the Bank of England.
Thatcher distrusted the BOE, which she viewed as a complacent, incompetent arm of a discredited British establishment. She referred to Gordon Richardson, the bank’s governor between 1973 and 1983, as “that fool who runs the Bank of England.” Writing in the margins of a memo that “I must put someone there I can rely on,” she complained to an adviser that, “I just don’t know how you can trust them.”
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