“How did an ivory-tower academic whose specialty is the details of the Great Depression get to this position? What does he do all day? How did so much power come to rest in a single institution, a single individual? The current system is the product of a century and a half of evolution in the role of a central bank, on both sides of the Atlantic, through a series of accidents and crises. For a generation, the idea of social democracy — with government ownership, control, and regulation of at least the “commanding heights” of the economy — has been in retreat. But in the middle of this market economy is an immense island of central planning: the Federal Reserve. In normal times, the Fed — not the market — decides what the short-term interest rate is. The interest rate is perhaps the key price in the economy. It is the price at which we trade wealth in the present for wealth in the future.”
Brad DeLong, Republic of the Central Banker
Great article.
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