Peter Conti-Brown

“CONCLUSION: THE CENTRAL BANKER AS JUDGE This breakdown of the Ulysses/punch-bowl function of the Federal Reserve doesn’t mean that separating some of the Fed’s functions from the day-to-day of electoral politics is unnecessary in the face of deflationary, rather than inflationary, pressures. In fact, the very opposite could be true: if there is a partisan movement in favor of economic policies that could result in a deflationary spiral, we would face the Great Depression redux. Keeping the power to trigger such a consequence away from partisan politics seems like a desirable goal for the institutional design of central banks. But it also requires a different theoretical frame. It may be that the frame for independence is one that we already widely accept in society: judicial independence. The U.S. Constitution gives the federal judiciary life tenure and effective budgetary independence (that is, while they can’t print their own money or raise it independent of congressional appropriations, the Congress cannot constitutionally lower judicial salaries). The reason is so that, to the fullest extent possible, any determinations that favor politicians occur either because the law compels it or because the judge and the politician share the same worldview. The idea that the judge is currying favor with the politician in hopes of further appointment or out of fear of getting her salary removed are taken off the table. It’s not a perfect system, but it is one that most recognize as an important balance between democratic values (the politician gets to appoint the judges from the polity) and some degree technocratic, objective judgment (the judges decide the cases, not the politicians).26 The crisis and the reactions to unconventional monetary policy suggest that the Fed is often performing a delicate adjudicative function, not a simply technocratic one. The problem with the technocratic, Ulysses-contract view of central banking are the two fractured constituencies mentioned above. While most economists have endorsed the Fed’s approach to postcrisis monetary policy, the “technocratic” view has been far from uniform. And, again, the populists aren’t clearly clamoring for prosperity by way of inflation, contra that Ulysses/punch-bowl view. At least in a crisis, and arguably in other times as well, the central bank isn’t”
― Peter Conti-Brown, The Power and Independence of the Federal Reserve