Politics and the Monetary and Banking System

This chapter looks back at the recent era of cheap money, when central banks kept interest rates low, to increase liquidity and to stimulate the economy, from the perspective of a politician with some understanding of economics. The author looks at the consequences of loose monetary policy from the perspectives of some socialists, monetarists and Austrian School economists, and questions the accountability of central banks when they fail to heed warnings of inflation or continuously miss their targets. The author also asks what can be done? While some argue for central banks to be abolished or for a return to a gold or commodity-based standard or ending central banks’ monopoly on issuing currency to allow competing currencies, the author considers whether the emergence of both private cryptocurrencies and central bank digital currencies (CBDC) may lead to a new era of currency competition, imposing market disciplines on central banks.