Capitalisn't Who Should The Fed Answer To? - ft. Sir Paul Tucker
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Jan 15, 2026 Sir Paul Tucker, former Deputy Governor of the Bank of England, dives deep into central bank independence and its implications for democracy. He challenges the Fed's self-governance, arguing it has detached from Congress and created an accountability gap, especially highlighted by the SVB collapse. Tucker critiques the notion of monetary policy as 'latent taxation' and calls for clearer congressional mandates. He also questions the complacency of markets amid potential financial instability, suggesting that the power dynamics may be skewing perceptions of risk. A thought-provoking discussion on the balance of power and accountability!
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Independence Trades Democratic Control For Stability
- Central bank independence shields monetary policy from short-term political pressures and prevents pre-election stimulus that causes inflation.
- But insulation can shift accountability away from voters and risk capture by career incentives tied to Wall Street.
Monetary Policy Is A Hidden Tax Tool
- Monetary instruments are latent instruments of taxation and therefore should not be controlled by the executive branch.
- Delegation to a legislature-created central bank requires clear constraints to prevent abuse of that latent taxation power.
Engage Congress Proactively
- The Fed should socialize its remit review with Congress and prioritize engagement with elected representatives.
- Greater transparency and dialogue would reinforce legitimacy since the Fed is a creature of Congress.
