A lesson from the Great Depression

Central bankers have to be realistic about the political environment in which they operate.  All the central bank cooperation in the world can’t solve a problem of imbalances, if the politicians don’t decide to cooperate too.  And betting the economy on the theory that the politicians just *have* to cooperate is not good central banking.

Central bank policy needs to take into account the possibly of political failure — even when that failure is “unthinkable”.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: