Despite their engagement with all manner of statistics and esoteric economic theories and their nominally non-partisan nature, they cannot help but be political animals. Their principal functions: setting interest rates, providing stable governance to their nation’s economy and financial sector requires subtle judgement and the ability to operate in a highly speculative environment. They are steeped in the arcane and the bureaucratic. They’re not democratically accountable and formal oversight is necessarily pretty loose; so, in the end, who can say why they do what they do.
They are not therefore, as a group, prone to radical thinking, but with the increasing dysfunction in mainline political processes, they might find themselves squeezed between their mandates and the formal political and legal limits on what they might do. Scrambling pretty hard to avert a total meltdown during the 2008 cratering of the financial system required some cutting of corners; most of which will never be known or believed.
In his intriguing SciFi novel of a few years ago, “The Ministry for the Future,” Kim Stanley Robinson posited a joint initiative by the leading central banks to set up a financing mechanism to fund reduction of carbon and climate adaptation based on the premise that the world (which includes the bankers’ particular responsibility for the global economy) was going to hell, so they had to act and claimed the power to take extraordinary action. Normal political leaders were happy to have somebody else actually deal with the obvious threat to civilization that they didn’t cause too much trouble as to the bankers’ exceeding the forms of democratic control and the climate crisis was mitigated. (Whew!) “Central Bankers Ride to the Rescue” is a great scenario and hardly the most outlandish to emerge from that genre. But what I’m suggesting here isn’t as dramatic or innovative; although it would require some subtlety and political courage.
When it comes to both politics and economics, central bankers are generally exceedingly smart and sophisticated. So, I can’t help but wondering what the US species: the Federal Reserve Board, is making of our domestic dysfunction, especially the possibility of the re-election of a certain former President and the implications for the overall state of the world and world economy. Whether in terms of climate, national security, global trade/finance, or culture wars, there are huge risks to the system they are both sworn and fundamentally inclined to protect.
While a good portion of Fed members are economic conservatives, none are blind or idiots; and likely there are some “never-Trumpers” among their number. Might they act? In fact, have they already begun to act? They would never do so overtly, and must mouth the ordinary mealy-mouthed platitudes about non-interference in the political process; but they’re masters of the strategic pause and raised eyebrow. Their tools—principally interest rates—are blunt instruments and there is no expectation of any precise management of the economy or timing of the business cycle. Still, bringing down interest rates soon and sharply, especially if recession can be avoided, will make the recent spike in prices seem increasingly “ancient” history by the time of the election. Economic growth and a remarkably low unemployment rate will, if they continue, help, too. After all, as we heard during the (Bill) Clinton campaigns, elections are usually all about “the economy, stupid.” To be sure, there are a bunch of other factors floating around this time, and bankers can’t solve the underlying nihilism among much of the electorate, but this befogged nudge in the economic environment might be enough to salvage Joe’s re-election.
Mindful of my recent comments about how much we understand of the nature of history—in terms of either the physical environment, mundane and indirect activities, or individual psychology—there’s no reason not to find this plausible even if it is effectively invisible to both current observers and later historians. This scenario might not happen. It might not work. It might work and never—ever—be acknowledged. “Tell-all” memoirs ain’t their style and “great man/woman” stories are not written about bankers.
[btw, much of this same thinking applies as well to the Supremes, especially as they hear the appeal of the Colorado decision on the 14A disqualification issue. They’ve got plenty of intellectual cover to uphold the disqualification and would get a lot of political support from never-Trumpers (both Dems and GOP). A lot of the mealy-mouthed Republicans (Mitch McConnell) would be privately delighted. Perhaps Roberts and one other (Kavanaugh? Barrett?) could scrape up the moral courage to put an end to the threat to the rule of law which HWSNBN represents.]