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To democratize finance, democratize central banking

David M. Woodruff

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Robert C. Hockett’s “franchise view” argues, convincingly, that the capacity of banks or quasi-bank financial entities to create money rests on the laws, regulations, and guarantees of the state under which they operate. Fred Block advocates the use of this insight as a beachhead for establishing the legitimacy of locally embedded, nonprofit lenders whose investments would be dedicated to public purposes. However, given the pervasive influence of “everyday libertarianism,” which fosters blindness to the public character of private economic power, this commentary warns of possible counterproductive consequences of this proposal unless it is fused to the democratization of central banking. An end to central bank independence would highlight the ineliminable role of the state in the market and make that role easier to reshape. It would also end the dynamic whereby monetary easing provides political cover for damaging fiscal austerity and thus lead to better democratic deliberation on the contours of policy.

Keywords: Central bank independence; everyday libertarianism; coordination of fiscal and monetary policy (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-hme, nep-mon and nep-pay
Date: 2019-12-01
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Published in Politics and Society, 1, December, 2019, 47(4), pp. 593-610. ISSN: 0032-3292

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