Past Present Future Ideas of Globalisation: Central Banks vs the People (and Trump!)
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May 8, 2025 Leah Downey, a political and economic theorist, delves into the intricate role of central banks, particularly the Federal Reserve, in shaping globalisation. She discusses how the Fed navigates its obligations to American democracy against global economic responsibilities. The conversation explores the impact of the euro dollar, the historical tension between central bankers and political officials, and the implications of the Volcker shock. Downey also examines the evolving relationship between monetary policy and national politics, hinting at insights into Trump's influence on these dynamics.
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BIS’s Origins and Political Crisis
- The Bank of International Settlements (BIS) was founded to manage Germany's reparations after WWI and became a key international hub for central bankers.
- Initially apolitical, the BIS ultimately failed during WWII when the Nazis exploited it for looting.
Central Banks as Expert Clubs
- Early central bankers saw their role as acting independently, guided by expertise beyond politicians and public opinion.
- They were motivated by sustaining capitalism and financial stability, not democratic accountability.
Dollar’s Global Role Post-WWII
- Keynes proposed an international currency at Bretton Woods, but U.S. political power ensured the dollar remained central.
- The eurodollar emerged as an offshore dollar currency due to demands outside direct U.S. state control, creating a decentralized global financial system.