It occurred to me that we are finally seeing the voters begin to influence monetary policy. The most obvious case is Japan, where monetary stimulus was a major issue in the recent election. But it’s also worth noting that the GOP tied its mast to hard money arguments that would have reduced our already anemic NGDP growth even further. Obviously monetary policy was not a major issue, but I think it’s fair to say that this was part of a set of policy positions that turned off thoughtful moderates. And like the Supreme Court, the Fed can read the election returns.
The British case is slightly different. There has been no recent election, but it’s hard to avoid the suspicion that the Coalition government moved decisively to get someone like Mark Carney because they fear the wrath of voters if fiscal austerity is not offset by monetary stimulus.
That leaves the ECB. I suppose one could argue that politics plays a role in the policy shift after Draghi took over from Trichet. But I’m inclined to think that this showed up more in the form of debt bailouts, not easier money. NGDP growth is still almost nonexistent in the eurozone. The ECB may be starting to find out what the Fed learned in late 2008 and early 2009, solving a debt crisis doesn’t automatically cure an AD shortfall.
In 2001 Argentine fans of the “currency board” learned that their policy regime was not as impregnable as they’d assumed. And in 1933 American supporters of the gold standard found that even the world’s largest monetary gold stock couldn’t prevent a devaluation under duress. The reason was the same in both cases—voters get the last word.
PS. Notice that the eurozone, which lags the other three central banks, is the one currency area that lacks an effective method for voters to voice their opinions. Of the four systems, it’s the one closest to a technocracy. Shows we can’t trust those ignorant voters, doesn’t it? Better leave this stuff to the “experts.”