Saturday September 19, 2020

Comment: Crunch time for central banks which must adjust to new realities

Monetary policymakers who are slow to address rapidly changing concerns such as environmental risks and wealth inequality will suffer reputational damage

15th September, 2020
When electorates made it clear they would not suffer austerity if the gold standard required it, the central banks that changed their policies quickly did well. Picture: Getty

In Golden Fetters, his celebrated study of the collapse of the gold standard in the interwar period, the American economic historian Barry Eichengreen emphasised that important political and social changes, in particular the extension of the franchise, had made it impossible to maintain the system. Electorates were no longer willing to endure austerity if sticking to the gold standard required it.

The prevailing monetary-policy regime was swept away in the new political landscape. Some countries,...

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