Some of the effects of monetary structures, politics, and memories on central banking

Monetary policies and central banking in general must of course be political. Interests with superior political influences are best able to secure their most-desired monetary and other government policies, which in turn depend on the structures of policymaking bodies such as central banks. After all, the Federal Reserve was designed by and for the big banks wanting government support, and the Bank of England was founded by a financially strapped government at war in exchange for a below-market-rate loan. This paper reviews examples of these more-or-less continual relations during eight crises or other stressful situations involving the British pound or American dollar. We find distinctions between the actions of the politically remote Federal Reserve during the Great Depression and the publicly more sensitive monetary authority (the U.S. Treasury) monitored by Congress during the post-Civil War resumption of the gold standard; and between the early private and market-sensitive Bank of England and the effectively public institution after 1914. There has been substantial theoretical development of monetary policies, but the political accountability of institutions also matters.