chapter  8
Creating credit and rating it: Central Banks in post-crisis global finance
Pages 20

In this chapter we return more directly to the theme of modern globalization. Again, this is centred on the financial system, but this time on the role of Central Banks in the post-crisis period, and of the consequent focus on sovereign debt that their actions have served to raise. One of the most intriguing developments since the crash is the way it propelled Central Banks (CBs) to the forefront of financial innovation and policy formation. As the political authorities abandoned activist macroeconomic management and set their treasuries and finance ministries the sole task of cutting public expenditure and organizing for austerity, the CBs took up any management of the economy that was permissible, or that they could get away with. And this was aided by their semi-autonomous status, granted to them by earlier political administrations’ determination to see CBs independent of direct political control, able to pursue monetary policy as they saw fit, albeit originally set within the bounds of conservative inflation targeting. This is the legacy CBs such as the US Federal Bank (US Fed), the European Central Bank (ECB) and the Bank of England (BoE) inherited as they faced the consequences of financial meltdown and monetary turmoil in the wake of the crisis (I come back to the Bank of Japan (BoJ) in a moment). But far from this inheritance completely constraining CBs it actually presented them with an opportunity: whether by design or fortunate circumstances they have seized the possibility of turning themselves into the premier activists of economic management. We now have what Bowman et al. (2013) have termed a ‘Central Bankled capitalism’ on an unprecedented scale. If, as a consequences of prolonged austerity, we add in the likelihood of very low growth rates for many years ahead (which seems feasible, see Alpert 2013) then we may be moving into a new and unusual era for advanced capitalism – low-growth Central Bank-led capitalism.