After Stagflation during the 1970s, many markets were liberalized and, over time, central banks made a lot more independent in lots of places. In addition, some countries in Europe embraced the EURO (and founded the ECB), and barriers between regulated banking and shadow-banking (including by investment banks) were removed.

The intended aim, and in certain respects the successful effect, of central bank independence was to de-politicize central banks in three senses: first, to remove the temptation for politicians to use interest rates to benefit their own electoral prospects (which was thought to be the cause behind persistent inflation). Second, to prevent the use of central banks as a piggy bank for well-connected interest groups. Third, to turn monetary policy over to technocratic experts and, thereby, remove it as an electoral issue.

Over time one unintended effect of the third kind of de-politization is to dumb down our political class, which need not show any interest in monetary policy because it can always pass the buck to central bankers, and even delegate the execution of other policies to them. Arguably this state of affairs also made political debates more focused on cultural issues and less on the complex trade-offs involving monetary (and so-called fiscal) issues. In addition, as central banking was removed from the political arena, and so able to move with great rapidity, central bankers were actually nudged into taking on a whole range of crisis management tasks.

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