Top Traders Unplugged

IL36: Democracy, Money, and the Central Bank - A Risky Balance ft. Leah Rose Downey

46 snips
Mar 26, 2025
Guest
Leah Downey
Leah Rose Downey, a Junior Research Fellow at St. John's College Cambridge and author of 'Our Money,' discusses the tension between central bank independence and democratic accountability. She questions whether it's healthy for democracy to give so much power to unelected officials and explores the historical evolution of central bank independence. Downey argues for greater legislative oversight and highlights the need for transparency in monetary policy, asserting that uncertainty can sometimes enhance economic resilience.
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ANECDOTE

Fed-Treasury Accord (1950)

  • The Fed-Treasury Accord of 1950 is considered the origin of central bank independence in the US.
  • This accord, however, wasn't formal legislation but a short memo lacking explicit mention of independence.
ANECDOTE

Credit Control Act Example

  • Downey cites the 1970s Credit Control Act as an example of Fed pushback against legislative power.
  • The Fed chair argued against the act, stating that guiding credit was a political decision best left to Congress.
INSIGHT

Legislative Muscle Atrophy

  • Legislatures, like muscles, lose strength when unused, particularly regarding monetary policy.
  • Ceding power to central banks weakens legislatures' ability and willingness to handle these issues.
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