The View | Central bankers should work to serve the people, not the markets
- Since 2007, central bank resources have been expanded and deployed in the private interests of vast, unregulated and systemically risky capital markets across the shadow banking system
- Such an undemocratic outcome must be reversed and power put back into the hands of elected governments, if we are to avert the climate crisis and looming civilisational collapse
Fifty years ago, a US president closed the gold window, ended capital controls, and launched a new era of globalised finance. The “Nixon shock” reshaped the international monetary system overnight, and then gradually changed the status of central bankers.
Despite their technocratic mystique, central bankers are politically appointed public servants on government payrolls, and still derive their authority from the taxpayers in their respective jurisdictions. Central bankers’ status and constitutional role is therefore primarily a democratic question, not an economic or technical one.
As the managers of public institutions that hold a monopoly over the issuance of currencies and liquidity, they wield powerful instruments that can be deployed only because they are backed by government treasuries.
Treasuries, in turn, are backed by a country’s fiscal resources – including tax revenues – and by public institutions that are vital to the private financial sector, such as the judicial system.
Despite the ideology of “free markets”, capitalism has always depended on public institutions and resources for its capital gains and profits, just as central banks have always presided over a hybrid private-public financial system.