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The new head of the Bundesbank, Joachim Nagel
Photo:
Britta Pedersen / dpa
The man's name is Joachim Nagel. So far, he was best known among financial market nerds. It's not really clear what he wants to do exactly. Since this week he has been President of the Deutsche Bundesbank, the legendary authority that is considered the supreme guardian of money in our country. And not for a few months, but for a whopping eight years. irrevocable. After weeks of secrecy between socialists and liberals. Because it had to be someone that neither one nor the other found too stupid.
Now we don't want to judge Mr. Nagel in advance.
Who knows what else he'll do.
It's just funny anyway that such a post is so shrouded in mystery and awarded without popular debate, while every backbencher in the Bundestag has to go to market places for his bench.
On closer inspection, the decision-making process for the President of the Bundesbank here and now even seems like an anachronism – not only because it is so hotly debated how the Germans can be protected from further surges in inflation without major collateral damage.
But also because what central banks do is simply highly political in times of climate change, distant financial capitalism and social division.
Simply raise interest rates was the simple formula
That was different in the 1980s and 1990s, as economic historian Adam Tooze explains in a paper that has just been published. At that time great faith in the markets was in vogue. And central banks should simply be careful that prices do not rise too much. Otherwise, they should just raise interest rates. This meant that central bankers were entrusted with the task alone - and it was ensured that the Bundesbankers in particular were not disturbed by tiresome inquiries and debates, that kind of democracy stuff.
The fact that these central bankers otherwise appear godlike neutral has always been a rather daring and strongly ideological assumption of mostly conservative economists. Today's reality couldn't be further from that. Even the central bankers would no longer object: without the massive intervention of the monetary watchdogs, the financial and euro crises since 2008 would have escalated into a terrible economic crisis. Whether they want it or not, in the unstable financial world of the 21st century, central bankers are also responsible for stopping financial and banking crises - most recently almost two years ago when the corona crisis broke out, when the financial system was in shock from faltering hedge funds and was on the verge of collapse was standing.
Now there is little dispute among experts that the central bankers have intervened to stabilize the past few years by buying government bonds. There would only have been alternatives: for example, handing out the money to the people instead of to the banks - so that it would have circulated faster and ensured a more stable economy. Now, most of all, the money issuance has meant that owners of stocks and real estate have become richer thanks to correspondingly higher stock prices and prices - and the gap between the top wealthy and the bottom half of society has widened.
That should be enough to discuss much more intensively, both professionally and democratically, in the best sense of gaining knowledge and a social consensus - instead of leaving it to people who never really have to justify themselves for it.
Let's put it this way: Such a gigantic work could have used a little more public participation.
This is anything but a mechanical decision, as was intended in the models from the market jubilee.
Catch price increases differently
The same applies to climate change.
Of course, the central bankers also have a hand in deciding how quickly the problem can be gotten under control – for example by choosing whether to buy more or fewer bonds from climate-damaging companies.
Which also brings us to the current concern: higher inflation.
If higher inflation rates are currently clearly being caused by higher energy prices and supply bottlenecks on the world markets, it will do little to raise key interest rates - on the contrary, this threatened to dampen the economy without changing the global trends caused by the corona virus. If in doubt, the central bankers would have to eliminate Corona, and the Karl Lauterbach in us says that the virus does not react sufficiently to key interest rates (at least there are no reliable studies on this yet).
Then it's legitimate to think about whether it wouldn't be more helpful to absorb the temporary price hikes with heating subsidies, for example, as the federal government is now planning to do - or to compensate for the loss of purchasing power through temporarily lower taxes, as the Bavarian world economist Markus Söder recommended this week.
Maybe also to control one or the other price, as the economist Isabella Weber recently threw out to the horror of the mostly older part of the guild.
It doesn't matter how you feel about each of the suggestions.
All of this shatters the nice old central banker model.
The illusion of the politically detached Oberbank bursts.
The ECB Director Isabel Schnabel recently hinted that the central bankers could also react with higher interest rates if higher prices come, for example, from CO₂ taxes intended for climate policy.
Why?
Why should a central bank take countermeasures and, in case of doubt, slow down the economy if the government wants to save the climate (regardless of whether that is the right way)?
This can be argued about and ultimately decided democratically - if it is true at all that saving the climate leads to (temporarily) higher inflation, it is in doubt about competing social goals.
However, a central bank that is democratically kept quite sterile does not then have to decide on this.
Next time not such a fuss
After all, the head of the ECB, Christine Lagarde, has to appear in front of the EU Parliament every few months and be questioned by elected MPs. Even that does not exist at the Bundesbank. Because that could allegedly interfere with independence. Mr. Nagel can now reign through – for eight years. And: even if he didn't get inflation under control all the time and his (co-)decisions exacerbated the climate crisis and wealth division in the country, there would be no way to vote him out. You have to be familiar with the insane mindset of market ultras and ordo-orthodoxy to understand something like this. That just doesn't fit anymore. Especially since, by the way, the Bundesbankers did not see inflation coming in 2021, contrary to what the new one suggested when he took office.
All this does not mean that the new one cannot become a good one.
The only question is what that means – and who decides about it.
It would be good to think about how the decisions of a Bundesbank, as an important participant in the ECB system, can be actively accompanied and generated democratically - and to ensure that such a Bundesbank boss no longer secretes the secrets of the coalition gang to the exclusion of the public next time at the latest and then enthroned.
There are too many new crises for that, the solution of which would have to be urgently debated - and which cannot be dealt with at all with the old central bankers' instruments.
What the man can create or cause is also too important for that.
