The connection drawn here to the tanking of Sarah Bloom Raskin's Fed nomination is critical. I would add one more name, though: Saule Omarova. Her nomination to be head of the OCC, the powerful bank regulatory agency, was fought with an even more vitriolic playbook -- perhaps because she was even more progressive than Bloom Raskin. Omarova's work, in fact, **directly** answers the last question posed here: what a democratic politics of central banking might look like.
Both you and Prof. Tooze understate the extent to which the left has been willing to fight with all the weapons at their disposal. Wasn't Bork treated just as badly as Raskin? And didn't Letitia James go after Trump as energetically as he is going after Lisa Cook? It may be that Clinton was too centrist, Obama too indecisive, and Biden too ineffectual to quite match Trump, but plenty of their ideological comrades were as aggressive as could be wished.
Imagine that 90% of the S&P were concentrated in a single stock. That's financial risk. Then imagine that 90% of the critical decision-making in the U.S. resides in one person... and that person is a would-be tyrant whose closest friend and role model is an international mass murderer and megalomaniac who loves gold trappings. That's imminent political risk. But the biggest long-term risks come from the cancellation of boring, invisible government programs that can prevent future disasters... like global warming, public health crises, or the loss of public education. That's Michael Lewis' "Fifth Risk." We can fight the wolf at the door today, but it's the termites that could eventually bring the house down.
Trump's Mafia-styled, draconic approach not only threatens the Fed's independence, but also influences domestic industrial policy. In a similar vein, I wrote about Trump's acquisition of a 10% stake in Intel here:
In Crashed and a few of the lectures you've given about the recovery from the 2008 crisis you speak of Timothy Geithner at the NY Fed and then Treasury and the way he was able to direct trillions of $s not just through the US but internationally.
This is an awesome power and Trump wants it.
The pre-Fed days when credit conditions varied substantially around the country is a warning of what a Fed not working for all Americans but only working for some can do.
I am always leery of arguments for "democratizing" central banking. It may be uncomfortable from a rather literal "democratic" viewpoint, but the Fed and other central banks have proven the essentially objective value of their independence. While they may make mistakes, they have not been malicious or manipulative mistakes, but legitimate mistakes in the very difficult process of reading economic data and balancing, in the Fed's case, inflation and full-employment mandates. The technocratic and data-driven powers of the Fed enabled it to be the best of all the actors in the difficult days of the global financial crisis. More broadly, the US regulatory agencies, with their substantial discretion to interpret their statutes (before the recent Supreme Court decision at least) were able to respond more flexibly, more promptly, and more effectively than the political instances in the US or the EU or elsewhere. The power of elected officials to appoint governors from time to time, for long terms, provides a degree of democratic control, as does the inevitable fact of political pressure. But independent central banks, insulated from direct political pressure have always -- always -- done better at their jobs of managing money supply and the banking system than central banks subject to political interference. Desiring to make them more "democratic" in an immediate, literal sense both invites perdition (cf. Turkey or Argentina) and, from a longer perspective, will undermine rather than strengthen, democracy.
As a credentialed member of the PMC (Yale, Berkeley, law firm partner, even a stint in government), I agree. But for me, the question is purely empirical. I don't share a lot of the moral and political beliefs of most members of our class, so I'm not "praying" for anything, just expecting that tariffs and a politicized central bank will lead to slower growth and higher inflation. If I'm wrong, I will rethink some of my economic presuppositions. My fear is more that I am right, but that the response will be Momdani/AOC-style socialism (a result, sad to say, which many members of the Columbia faculty would welcome), rather than a restoration of the prior system, which has worked as well as anything can when made by fallible humans.
Agree, but I think there's an equal danger of another major financial crisis, given meddling with the central bank, relaxation of Dodd-Frank and other financial regulations, and crypto-madness (embraced by our ruling family and ruling party) with only very light-touch pseudo regulation. Personally, I think that's a greater danger than the inflation that is likely to follow the tariff onslaught. And, of course, you are right that the danger is the Democrats will embrace something too-far left, guaranteeing that the Trumpistanis get away with more than they ought. And I agree with the "... prior system, which has worked as well as anything can when made by fallible humans." That is essentially what Keynes's insights mean.
The question which haunts me is what comes after Trump. Are we on thecusp of a revolution in our political & governmental norms, like in 1861, 1933, & 1954? Or in 2028 will we snap back more or less to what we were, as in 1922? I dunno. I think though that I do know two things. First, our only real crisis is immigration, and we've gone through several before without changing those norms. (The only possible exception, I think, is the turn of the 19th century, and it's only possible in my mind because Washington Irving satirized it in "A History of New York.") Second, Trump is no Lincoln, FDR, or Ike; he's such a small, pitiful man to preside over such change.
Not sure what immigration crisis you are referring to. The only immigration crisis today is that we won't have enough workers to build the homes we need and take care of us old folks. Our native population is not growing, guys.
Well, that this certainly the obsession of the MAGA base, even if it operates on some dark, subconscious level. I would add "Uneducated" to WASP, but that would spoil the acronym.
The United States is simply dropping any lingering pretense of being anything other than an empire. Think of Trump as a sort of halfwit Tiberius Gracchus.
"Why were Democratic administrations not as ambitious, determined, ruthless, aggressive, risk-taking, not to say brave, in pursuit of our agenda as MAGA are in pursuit of theirs? MAGA may be bonkers and foolhardy. But they are willing to take risks in a way “we” were not. “Our democracy” may have been competent, but it was also conformist."
Exactly what I have been asking myself. Why did Obama and the Dems not decimate the private health insurers during his first term, to put in 'Medicare for all?' Gee, could it be that taking out insurance companies would make members of the PMC worse off?
Ah well. And, talking with Canadian friends of my neighbors last week, I learned that Canada provides 'dental care for all' for children up to the age of 21 and seniors over 65. And, daily, I see more and more people with missing teeth here in western New York State.
Periodically, Adam's discussions awkwardly straddle his two roles: professor and public intellectual. This Chartbook is an example. Let's use this attack on a black female Governor of the Fed by a lunatic President Trump, Adam is suggesting, to explore the relationship between democracy and central banking. Well, hello Professor Tooze. The house is on fire. Let's discuss. ,
"Isn’t it time to actually define what the appeal of “our democracy” actually is?"
If by "our democracy" you mean the Krugman neoliberal definition, it's been defined, and has zero appeal. In fact, it's driven literally tens of millions of American men (whom many of the youngest have determined they have little, if anything to lose) to buy multiple firearms, billions of rounds of ammunition, and seek the capacity to be competent with them.
Fortunately it looks (as of this moment), that none of that will be needed (I certainly don't want it, nor hope for it).
As to what is coming: prepare for nothing less than a complete restructuring of the global order and destruction of the permanent managerial state.
I'm giving you a head's up because you appear to at least have the capacity to be honest.
Krugman is a Keynesian. Central banks are nominally independent largely b/c of Keynes's intellectual work.
Neoliberals hates Keynes.
You are correct that a complete restructuring of the global order and destruction of the permanent managerial state is underway.
And once that is done, and all those billions of bullets are spent, and the world lies in the ruins, it is PMCers like Keynes and Krugman who will rebuild it. Just like they did the last time, and the time before that.
And then people like you will complain about the wallpaper they chose, like always.
I'm afraid it looks like a succession of charismatic leaders, alternately right and left, with a stagnant economy, corruption and crony capitalism, and an unstable currency.
I find it pretty funny that a spurious attack by a white male wingnut, drunk with the newly acquired power of a federal mortgage agency, fully supported by the white techbro billionaire class, against an Afro-American woman Fed governor, is somehow an democratization of the control of interest rates?
Could it be that the resentment of the PMC is because that PMC is no longer the sole the domain of white males?
Unfortunately Cook is toast. Although there has been no investigation or indictment Cook hasn’t come out and unequivocally denied the allegation. During the 2008 financial crisis many liar loans were made and mostly only the small fry were prosecuted but Cook is in a very high profile position and in MAGA’s way. Who would have known that some day she would be up against a most corrupt administration and needed to be cleaner than Kleenex when she applied for the job.
I believe she has denied any wrongdoing. The burden of proof is not on her. It is on Trump and his lapdog Pulte. And they have a lot to prove in order to establish that Cook committed fraud.
Indeed, Adam. As the ever perspicacious Brett Christophers asks, "Whose Fed? Trump’s recent attacks on Jerome Powell’s Federal Reserve raise a deeper question: Are central banks really independent in the first place?"
The "independence" of central banks has always been something of a charade, and a deeply undemocratic one. An institution is what it does, and "independent" central banks are, by design, aristocratic institutions inimical to labour. Hence all of the pearl clutching among "the good and great."
It's political economy, and always has been. I for one welcome a return to the consolidated Treasury and an end to the abdication of responsibility on the part of our elected representatives where economic outcomes are concerned. For too long they've been hiding behind the Fed's skirts in order to evade democratic accountability.
For the record, I have no use for Trump and his merry band of vandals, but elections have consequences and it's well and truly past time the Democrats started acting accordingly ...
Part of a system rested on democratic institutions is that there is a balance of power between the various branches of government. Courts, the legislature and the central bank must remain independent from arbitrary interference by the executive branch. Surely there is a difference between a genuine public discourse about the role of CBs in society and a blatantly racist power grab as is the case now.
I am not sure what your point is, other than you don't like Krugman. I guess you prefer a Trump controlled Fed because that is more "democratic." Me, I prefer, a professional Fed that is managing monetary policy according to the law. I guess you forgot all the Panics that pre-dated the Fed, including the one of 1837 which would have been mitigated by a 2nd Bank of the US, but for Andew Jackson's Trump-like obstinacy. As for the bond market, it isn't that investors won't buy US debt, it is that the market will demand a risk premium, so long rates will go up. And the dollar will depreciate. Perhaps the Saudis will decide oil should be priced in Euros.
'the price of money is essentially political" -- indeed a new paradigm. Krugman was emotional; Adam Tooze is rational, analytical and clear-eyed. He has asked some relevant questions at the end which need to be tackled.
The price of money is NOT political in the least. The price of money is determined by comparative advantage of currencies, inflation, credit risk, time, and supply and demand. Lenders want to be repaid. And they want to be compensated for the risk they are taking to lend money. That assessment is made by humans, and, yes, humans can be influenced by political beliefs, but there is fundamental financial math here, too, that is as important. Equity markets may be political, too much so, but the bond market consists of steely-eyed creditors who want to be repaid in money that hasn't been eroded by inflation.
Nobody disputes your statement, least of all AT an economist. He quotes Rabobank to show how politicians are trying to influence cynically economic policies.
Maybe there's a big dogwhistle hiding in Krugman's Spartacus reference. The "I'm Spartacus" scene has a curious backstory and an even stranger afterlife, worthy of our MAGA-Epstein obsessed times. https://www.youtube.com/watch?v=WGxXkJPDhQQ
The connection drawn here to the tanking of Sarah Bloom Raskin's Fed nomination is critical. I would add one more name, though: Saule Omarova. Her nomination to be head of the OCC, the powerful bank regulatory agency, was fought with an even more vitriolic playbook -- perhaps because she was even more progressive than Bloom Raskin. Omarova's work, in fact, **directly** answers the last question posed here: what a democratic politics of central banking might look like.
(https://www.npr.org/2021/12/13/1063767973/saule-omarova-gets-candid-banks-sank-her-nomination-to-head-occ). Her nomination was stalled by the same wing of the democratic party: Manchin, Sinema, and corporate dems like Mark Kelly.
Thank you for this.
Both you and Prof. Tooze understate the extent to which the left has been willing to fight with all the weapons at their disposal. Wasn't Bork treated just as badly as Raskin? And didn't Letitia James go after Trump as energetically as he is going after Lisa Cook? It may be that Clinton was too centrist, Obama too indecisive, and Biden too ineffectual to quite match Trump, but plenty of their ideological comrades were as aggressive as could be wished.
Imagine that 90% of the S&P were concentrated in a single stock. That's financial risk. Then imagine that 90% of the critical decision-making in the U.S. resides in one person... and that person is a would-be tyrant whose closest friend and role model is an international mass murderer and megalomaniac who loves gold trappings. That's imminent political risk. But the biggest long-term risks come from the cancellation of boring, invisible government programs that can prevent future disasters... like global warming, public health crises, or the loss of public education. That's Michael Lewis' "Fifth Risk." We can fight the wolf at the door today, but it's the termites that could eventually bring the house down.
Trump's Mafia-styled, draconic approach not only threatens the Fed's independence, but also influences domestic industrial policy. In a similar vein, I wrote about Trump's acquisition of a 10% stake in Intel here:
https://kainesianmacro.substack.com/p/chipmaking-capitalism-with-american
In Crashed and a few of the lectures you've given about the recovery from the 2008 crisis you speak of Timothy Geithner at the NY Fed and then Treasury and the way he was able to direct trillions of $s not just through the US but internationally.
This is an awesome power and Trump wants it.
The pre-Fed days when credit conditions varied substantially around the country is a warning of what a Fed not working for all Americans but only working for some can do.
I'm of the opinion the Trump regime wants to return to the original mandated of the Fed, and set rates regionally.
There's no reason a farmer in Alabama should have to pay the same rate as a techbro in SF.
They do pay different risk premiums on top of the risk free rate. It is as simple as that.
Hang on, you are not arguing that the Fed should set rates for individual borrowers or groups of borrowers, are you? That would be nuts.
Window guidance used to be thing -- maybe look into it.
2500 words and you didn't mention one quirky reason Trump might have targeted Lisa Cook? Just a weird coincidence?
I am always leery of arguments for "democratizing" central banking. It may be uncomfortable from a rather literal "democratic" viewpoint, but the Fed and other central banks have proven the essentially objective value of their independence. While they may make mistakes, they have not been malicious or manipulative mistakes, but legitimate mistakes in the very difficult process of reading economic data and balancing, in the Fed's case, inflation and full-employment mandates. The technocratic and data-driven powers of the Fed enabled it to be the best of all the actors in the difficult days of the global financial crisis. More broadly, the US regulatory agencies, with their substantial discretion to interpret their statutes (before the recent Supreme Court decision at least) were able to respond more flexibly, more promptly, and more effectively than the political instances in the US or the EU or elsewhere. The power of elected officials to appoint governors from time to time, for long terms, provides a degree of democratic control, as does the inevitable fact of political pressure. But independent central banks, insulated from direct political pressure have always -- always -- done better at their jobs of managing money supply and the banking system than central banks subject to political interference. Desiring to make them more "democratic" in an immediate, literal sense both invites perdition (cf. Turkey or Argentina) and, from a longer perspective, will undermine rather than strengthen, democracy.
As a credentialed member of the PMC (Yale, Berkeley, law firm partner, even a stint in government), I agree. But for me, the question is purely empirical. I don't share a lot of the moral and political beliefs of most members of our class, so I'm not "praying" for anything, just expecting that tariffs and a politicized central bank will lead to slower growth and higher inflation. If I'm wrong, I will rethink some of my economic presuppositions. My fear is more that I am right, but that the response will be Momdani/AOC-style socialism (a result, sad to say, which many members of the Columbia faculty would welcome), rather than a restoration of the prior system, which has worked as well as anything can when made by fallible humans.
Agree, but I think there's an equal danger of another major financial crisis, given meddling with the central bank, relaxation of Dodd-Frank and other financial regulations, and crypto-madness (embraced by our ruling family and ruling party) with only very light-touch pseudo regulation. Personally, I think that's a greater danger than the inflation that is likely to follow the tariff onslaught. And, of course, you are right that the danger is the Democrats will embrace something too-far left, guaranteeing that the Trumpistanis get away with more than they ought. And I agree with the "... prior system, which has worked as well as anything can when made by fallible humans." That is essentially what Keynes's insights mean.
The question which haunts me is what comes after Trump. Are we on thecusp of a revolution in our political & governmental norms, like in 1861, 1933, & 1954? Or in 2028 will we snap back more or less to what we were, as in 1922? I dunno. I think though that I do know two things. First, our only real crisis is immigration, and we've gone through several before without changing those norms. (The only possible exception, I think, is the turn of the 19th century, and it's only possible in my mind because Washington Irving satirized it in "A History of New York.") Second, Trump is no Lincoln, FDR, or Ike; he's such a small, pitiful man to preside over such change.
Not sure what immigration crisis you are referring to. The only immigration crisis today is that we won't have enough workers to build the homes we need and take care of us old folks. Our native population is not growing, guys.
He is worried about the ever decreasing WASP %-of-the-total population figure, like so many MAGA types (especially as it concerns the "W" part).
Well, that this certainly the obsession of the MAGA base, even if it operates on some dark, subconscious level. I would add "Uneducated" to WASP, but that would spoil the acronym.
I think that Trump himself only cares about what happens next to flatter his vanity and enhance his power. If it benefitted him, he would throw WASPS under the bus in a heartbeat. see https://charles72f.substack.com/p/vendettanomics-trumps-war-on-econ
The United States is simply dropping any lingering pretense of being anything other than an empire. Think of Trump as a sort of halfwit Tiberius Gracchus.
I prefer to describe him as a bizarro Chauncey Gardiner.
"Why were Democratic administrations not as ambitious, determined, ruthless, aggressive, risk-taking, not to say brave, in pursuit of our agenda as MAGA are in pursuit of theirs? MAGA may be bonkers and foolhardy. But they are willing to take risks in a way “we” were not. “Our democracy” may have been competent, but it was also conformist."
Exactly what I have been asking myself. Why did Obama and the Dems not decimate the private health insurers during his first term, to put in 'Medicare for all?' Gee, could it be that taking out insurance companies would make members of the PMC worse off?
Ah well. And, talking with Canadian friends of my neighbors last week, I learned that Canada provides 'dental care for all' for children up to the age of 21 and seniors over 65. And, daily, I see more and more people with missing teeth here in western New York State.
Periodically, Adam's discussions awkwardly straddle his two roles: professor and public intellectual. This Chartbook is an example. Let's use this attack on a black female Governor of the Fed by a lunatic President Trump, Adam is suggesting, to explore the relationship between democracy and central banking. Well, hello Professor Tooze. The house is on fire. Let's discuss. ,
"Isn’t it time to actually define what the appeal of “our democracy” actually is?"
If by "our democracy" you mean the Krugman neoliberal definition, it's been defined, and has zero appeal. In fact, it's driven literally tens of millions of American men (whom many of the youngest have determined they have little, if anything to lose) to buy multiple firearms, billions of rounds of ammunition, and seek the capacity to be competent with them.
Fortunately it looks (as of this moment), that none of that will be needed (I certainly don't want it, nor hope for it).
As to what is coming: prepare for nothing less than a complete restructuring of the global order and destruction of the permanent managerial state.
I'm giving you a head's up because you appear to at least have the capacity to be honest.
Krugman is a Keynesian. Central banks are nominally independent largely b/c of Keynes's intellectual work.
Neoliberals hates Keynes.
You are correct that a complete restructuring of the global order and destruction of the permanent managerial state is underway.
And once that is done, and all those billions of bullets are spent, and the world lies in the ruins, it is PMCers like Keynes and Krugman who will rebuild it. Just like they did the last time, and the time before that.
And then people like you will complain about the wallpaper they chose, like always.
What does the new world look like afterwards?
I'm afraid it looks like a succession of charismatic leaders, alternately right and left, with a stagnant economy, corruption and crony capitalism, and an unstable currency.
Sell, sell, sell.
I find it pretty funny that a spurious attack by a white male wingnut, drunk with the newly acquired power of a federal mortgage agency, fully supported by the white techbro billionaire class, against an Afro-American woman Fed governor, is somehow an democratization of the control of interest rates?
Could it be that the resentment of the PMC is because that PMC is no longer the sole the domain of white males?
Unfortunately Cook is toast. Although there has been no investigation or indictment Cook hasn’t come out and unequivocally denied the allegation. During the 2008 financial crisis many liar loans were made and mostly only the small fry were prosecuted but Cook is in a very high profile position and in MAGA’s way. Who would have known that some day she would be up against a most corrupt administration and needed to be cleaner than Kleenex when she applied for the job.
I believe she has denied any wrongdoing. The burden of proof is not on her. It is on Trump and his lapdog Pulte. And they have a lot to prove in order to establish that Cook committed fraud.
Indeed, Adam. As the ever perspicacious Brett Christophers asks, "Whose Fed? Trump’s recent attacks on Jerome Powell’s Federal Reserve raise a deeper question: Are central banks really independent in the first place?"
https://www.nybooks.com/online/2025/08/17/whose-fed-independent-central-bank/
The "independence" of central banks has always been something of a charade, and a deeply undemocratic one. An institution is what it does, and "independent" central banks are, by design, aristocratic institutions inimical to labour. Hence all of the pearl clutching among "the good and great."
It's political economy, and always has been. I for one welcome a return to the consolidated Treasury and an end to the abdication of responsibility on the part of our elected representatives where economic outcomes are concerned. For too long they've been hiding behind the Fed's skirts in order to evade democratic accountability.
For the record, I have no use for Trump and his merry band of vandals, but elections have consequences and it's well and truly past time the Democrats started acting accordingly ...
Part of a system rested on democratic institutions is that there is a balance of power between the various branches of government. Courts, the legislature and the central bank must remain independent from arbitrary interference by the executive branch. Surely there is a difference between a genuine public discourse about the role of CBs in society and a blatantly racist power grab as is the case now.
I am not sure what your point is, other than you don't like Krugman. I guess you prefer a Trump controlled Fed because that is more "democratic." Me, I prefer, a professional Fed that is managing monetary policy according to the law. I guess you forgot all the Panics that pre-dated the Fed, including the one of 1837 which would have been mitigated by a 2nd Bank of the US, but for Andew Jackson's Trump-like obstinacy. As for the bond market, it isn't that investors won't buy US debt, it is that the market will demand a risk premium, so long rates will go up. And the dollar will depreciate. Perhaps the Saudis will decide oil should be priced in Euros.
'the price of money is essentially political" -- indeed a new paradigm. Krugman was emotional; Adam Tooze is rational, analytical and clear-eyed. He has asked some relevant questions at the end which need to be tackled.
The price of money is NOT political in the least. The price of money is determined by comparative advantage of currencies, inflation, credit risk, time, and supply and demand. Lenders want to be repaid. And they want to be compensated for the risk they are taking to lend money. That assessment is made by humans, and, yes, humans can be influenced by political beliefs, but there is fundamental financial math here, too, that is as important. Equity markets may be political, too much so, but the bond market consists of steely-eyed creditors who want to be repaid in money that hasn't been eroded by inflation.
Nobody disputes your statement, least of all AT an economist. He quotes Rabobank to show how politicians are trying to influence cynically economic policies.
Maybe there's a big dogwhistle hiding in Krugman's Spartacus reference. The "I'm Spartacus" scene has a curious backstory and an even stranger afterlife, worthy of our MAGA-Epstein obsessed times. https://www.youtube.com/watch?v=WGxXkJPDhQQ