ECB Hannelore Foerster/Stringer

The Year Ahead 2017

Populism and the Future of Central Banking

With populist movements gaining ground, their complaints about independent monetary policymakers could now change the relationship between central banks, treasuries, and legislatures. The question for 2017 is whether that would be a good thing, or whether central-bank independence should be defended against the coming attack.

LONDON – Throughout 2016, populist movements in developed countries set their sights on central-bank independence. To the populist bull, unelected technocrats wielding policies that have political and distributional consequences may as well be waving a red cape.

In the United States, a bill seeking to audit the Federal Reserve – and thus to subject quotidian monetary-policy decisions to congressional review – was narrowly defeated in early 2016. And, during his campaign, President-elect Donald Trump accused Fed Chair Janet Yellen of politicizing Fed decision-making.

In Europe, the populist clamor against unelected European Union bureaucrats and the independent European Central Bank has grown louder; and in the United Kingdom, Labour Shadow Chancellor of the Exchequer John McDonnell has called for “democratic control” over interest rates, implying that the Bank of England’s monetary policy has been geared toward helping financial institutions.

To continue reading, please subscribe to On Point.

To access On Point, log in or register now now and read two On Point articles for free. For unlimited access to the unrivaled analysis of On Point, subscribe now.

required

Log in

http://prosyn.org/Q9NEX5s;
  1. Trump visits China Thomas Peter-Pool/Getty Images

    China’s New World Order?

    • Now that Chinese President Xi Jinping has solidified his position as China’s most powerful leader since Mao Zedong, he will be able to pursue his vision of a China-led international order.

    • But if China wants to enjoy the benefits of regional or even global hegemony in the twenty-first century, it will have to prove itself ready to accept the responsibilities of leadership.
  2. Paul Manafort Alex Wong/Getty Images

    The Fall of the President’s Men

    • There can no longer be any doubt that Donald Trump is the ultimate target of Special Counsel Robert Mueller’s sweeping investigation of alleged Russian interference in the 2016 presidential election. 

    • But even if Mueller doesn’t catch Donald Trump in a crime, the president will leave much human and political wreckage behind.
  3. Painted portraits of Chinese President Xi Jinping and late communist leader Mao Zedong Greg Baker/Getty Images

    When China Leads

    For the last 40 years, China has implemented a national strategy that, despite its many twists and turns, has produced the economic and political juggernaut we see today. It would be reckless to assume, as many still do in the US, Europe, and elsewhere, that China’s transition to global preeminence will somehow simply implode, under the weight of the political and economic contradictions they believe to be inherent to the Chinese model.