One of the most notable aspects of the response of western democracies to the cataclysmic economic events of the past decade has been the absence of any attempt to restrict the powers of the central banks. Far from it. With little political controversy, they have been allowed to increase their balance sheets by over 20 per cent of GDP, enormously widen their regulatory role, and profoundly alter the distribution of wealth in our societies.
Cynics will say that it is easy for politicians to approve of central banks when they choose voluntarily to pursue unprecedentedly easy monetary policy. It is when this is reversed that political problems would normally be expected to arise. But, in the US, we are now seeing signs that some members of Congress are seeking to shackle the Fed, not because policy has been too tight, but because they think it has been too accommodative. Read more