The USA's Old Republic had a great framework in these regards that existed for about 140 years from the 1830s until it was dismantled as part of the advent of the so called Neo Liberal Era. The Old Republic had interstate (sometimes inter region) capital flow inhibitors back then (we had them for every day of the nations existence until they were done away with between the latter 1970s and mid 1980s), we had state level usury laws, we had multiple classes of banks with some of them having geographic or sectoral capital allocation biases (we dont have those anymore despite appearances, like, they literally changed the laws for credit unions all the way back in, again, the latter 1970s to mid 1980s and made them fundamentally mostly not credit unions anymore, among other examples). And regards to the central bank, well, the central bank itself didnt become centralized until 1935, then there was some years of resistance to it, so it didnt really get up and running with real, wide, and deep centralization until after the war and then there was still all that other stuff that *mostly* checked and negated its de-democratizing aspects until the were slowly chipped away at and then done away with some big moves. But I've visited the debates and conversations leading up to its creation and there were other viable paths, including a modification of the prior system which was centered around the old Independent Treasury...
Could you please provide evidence or references containing it to justify the sentence in the text: “ Many episodes of high inflation have occurred under independent central banks, while some systems with more democratic monetary control have maintained price stability.”
Examples of high inflation under independent central banks:
1. Weimar Republic Germany (Reichsbank) - Experienced hyperinflation in 1923 while operating independently
2. Latin American central banks in the 1980s - Brazil, Argentina, and others experienced high inflation despite formal central bank independence
3. Zimbabwe (Reserve Bank of Zimbabwe) - Despite its technical independence, experienced hyperinflation from 2007-2009
4. Turkey's recent experience (2021-2024) - High inflation despite having an officially independent central bank
Examples of price stability under more democratic monetary control:
1. Bank of North Dakota (BND) model - A state-owned bank operating since 1919, has contributed to economic stability in North Dakota while under public control
2. Post-war Japan (1945-1970s) - Achieved price stability and high growth with the Bank of Japan under more direct democratic control
3. Canada's central bank (1938-1974) - Maintained price stability while operating under more direct government control
Fabulous article which provides the rationale and outline of the model forward.
Would be interested if you are working toward this goal.
My only reservation is about reliance in apparently captured government structures at all levels. Could a Commons approach provide a better grass roots, democratic base for the model?
One could envision a hybrid model where Commons-based governance structures operate alongside, and potentially transform, existing institutions. This could begin with community-managed monetary commons – perhaps through cooperative financial institutions or mutual credit systems.
How does monetary policy suppress wage growth? I understand the connection but I'm not clear on the mechanics of it. I suppose the real question is what exactly are wages? The price of labor?
monetary policy elements such as interest rates effect things like investment and employment; and with a policy bias towards asset price inflation while suppressing wage growth, becomes problematic.
The USA's Old Republic had a great framework in these regards that existed for about 140 years from the 1830s until it was dismantled as part of the advent of the so called Neo Liberal Era. The Old Republic had interstate (sometimes inter region) capital flow inhibitors back then (we had them for every day of the nations existence until they were done away with between the latter 1970s and mid 1980s), we had state level usury laws, we had multiple classes of banks with some of them having geographic or sectoral capital allocation biases (we dont have those anymore despite appearances, like, they literally changed the laws for credit unions all the way back in, again, the latter 1970s to mid 1980s and made them fundamentally mostly not credit unions anymore, among other examples). And regards to the central bank, well, the central bank itself didnt become centralized until 1935, then there was some years of resistance to it, so it didnt really get up and running with real, wide, and deep centralization until after the war and then there was still all that other stuff that *mostly* checked and negated its de-democratizing aspects until the were slowly chipped away at and then done away with some big moves. But I've visited the debates and conversations leading up to its creation and there were other viable paths, including a modification of the prior system which was centered around the old Independent Treasury...
keep capital more locally accountable…
Could you please provide evidence or references containing it to justify the sentence in the text: “ Many episodes of high inflation have occurred under independent central banks, while some systems with more democratic monetary control have maintained price stability.”
Examples of high inflation under independent central banks:
1. Weimar Republic Germany (Reichsbank) - Experienced hyperinflation in 1923 while operating independently
2. Latin American central banks in the 1980s - Brazil, Argentina, and others experienced high inflation despite formal central bank independence
3. Zimbabwe (Reserve Bank of Zimbabwe) - Despite its technical independence, experienced hyperinflation from 2007-2009
4. Turkey's recent experience (2021-2024) - High inflation despite having an officially independent central bank
Examples of price stability under more democratic monetary control:
1. Bank of North Dakota (BND) model - A state-owned bank operating since 1919, has contributed to economic stability in North Dakota while under public control
2. Post-war Japan (1945-1970s) - Achieved price stability and high growth with the Bank of Japan under more direct democratic control
3. Canada's central bank (1938-1974) - Maintained price stability while operating under more direct government control
Great article. Very relevant to South Africa.
Fabulous article which provides the rationale and outline of the model forward.
Would be interested if you are working toward this goal.
My only reservation is about reliance in apparently captured government structures at all levels. Could a Commons approach provide a better grass roots, democratic base for the model?
One could envision a hybrid model where Commons-based governance structures operate alongside, and potentially transform, existing institutions. This could begin with community-managed monetary commons – perhaps through cooperative financial institutions or mutual credit systems.
Do you have thoughts about a way forward with strengthening democracy at local and state level?
How does monetary policy suppress wage growth? I understand the connection but I'm not clear on the mechanics of it. I suppose the real question is what exactly are wages? The price of labor?
monetary policy elements such as interest rates effect things like investment and employment; and with a policy bias towards asset price inflation while suppressing wage growth, becomes problematic.