Keith Rankin, 13 February 2026
On 14 January, Al Jazeera produced an episode of ‘Inside Story’, their daily current affairs feature programme: Why is the US Fed chair criminal probe causing global alarm? The context is the conflict between the Federal Reserve Chairman Jerome Powell, versus the man who appointed him to that role, President Donald Trump. In the sense of this conflict, Powell is the archetypal technocrat (the spokesperson for his craft guild), and Trump is playing the role of the democrat (the spokesperson for the American people).
(We note that, in New Zealand, something similar but different is happening; effectively a conflict – for a tiny slice of the historical narrative – between former Reserve Bank Governor Adrian Orr and the current Minister of Finance, Nicola Willis. It may be said that power is held by those who control the money, and by those who control the narrative.)
The format of Inside Story is that of three remotely-located expert or otherwise-interested interviewees, interviewed by a news-anchor studio interviewer. (Former Newshub newsreader Tom McRae serves as one such interviewer.)
For this episode, the interviewer was Adrian Finighan. The interviewees were: an American political commentator, Eric Ham; a London-based commentator representing the finance industry, Justin Urquhart-Stewart; and a celebrity Irish monetary economist, David McWilliams. (McWilliams was speaking in New Zealand last October; claims have been made that he is the “Attenborough” of economics.)
It is to McWilliams that I particularly wish to focus my comments; so, below, I have transcribed his contributions to the panel discussion. (I will confine my comments re McWilliams to his contributions to the Al Jazeera programme, and not to his writings or other presentations.) But first I have transcribed opening words from Finighan, Ham, and Urquhart-Stewart. There are also comments from Jerome Powell, reporter Fintan Monaghan, and German Chancellor Friedrich Merz. (To maintain focus the transcriptions have been slightly condensed; the original interview is available, see above.)
Finighan, Ham, and Urquhart-Stewart
Finighan: “A criminal investigation into the Chair of the Fed, Jerome Powell … could have implications well beyond the US … a swift and sharp response from central banks around the world, a joint statement expressing solidarity with Powell.”
Powell: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President … [through] political pressure or intimidation.”
The general tone here is that Powell – the chairman of a committee – is the good guy, and Trump the bad guy. In this sense the discussion falls into the trope that if there’s a bad guy [ie Trump], then the bad guy’s adversary must be a good guy. Note how Powell presents himself as the ‘man of the people’, even though in reality he is anything but.
Of course, it goes without saying that a narrowly focussed criminal law investigation is not an appropriate forum for discussing democracy and monetary policy. And there is no doubt that President Trump is intimidating, and has a tendency for ad hominem flights of fancy. We should note, for clarification, that the criminal charges referred to relate to the expansion of a building, and not to misconduct in the setting of interest rates.
Reporter, Fintan Monaghan: “The two [President and Chairman] have been at odds over the setting of interest rates for most of the past year. Trump wants cuts. That might give the economy a short-term boost by bringing down the cost of borrowing money, but Powell has resisted because it could cause inflation. … Heads of major central banks around the world, including the ECB’s Christine Lagarde, have voiced support for Powell and the independence of the Fed. Central Banks have traditionally operated separately from the central government. That keeps long-term decisions about the health of the economy separate from short-term political [aka democratic] interests.”
Friedrich Merz: “I hope there will remain a broad consensus that central banks must remain independent because independent central banks are a guarantee that a currency can remain stable in the long term.”
We may note these themes are emphasised by those who we might call ‘monetary policy hawks’; and most central bankers are monetary policy hawks in that they emphasise the notion of raising interest rates as the sine qua non [without which not] of anti-inflation purgative emulsions.
To claim that Reserve Banks have traditionally operated separately from the central government, indicates that some commentators have a very short sense of history. Most central banks operated as a long-arm of government for most of their histories (and most are less than 100 years old; the RBNZ has existed since 1934). The American Fed is usually regarded as having been independent since 1951, though it’s always been a political organisation with politically appointed leaders. Most Reserve Banks have a single shareholder; the Government. During Abenomics, Japan’s central bank was fundamentally a part of Shinzo Abe’s macroeconomic program. As was New Zealand’s Reserve Bank in, say, the late 1930s, when it played a crucial role in implementing the economic policies which launched New Zealand into the position of a global exemplar for a modern egalitarian economy.
We note also that central bankers generally favour the cynical word ‘political’ over the much happier word ‘democratic’. And we note that Friedrich Merz may be confused. He appears to be referring to a national or imperial ‘currency’ such as the Euro, whereas monetary policy at its highest calling seeks to protect the internal value of money; not its external value. (The internal value relates to inflation and deflation; external value relates to currencies’ exchange rates.)
Eric Ham [author and political commentator]: “… that very independence which has actually fuelled United States’s monetary growth.”
Justin Urquhart-Stewart [chairman of an investment platform]: “There is one vital word that central bankers have to give out and that is confidence … this is the first time that I’ve seen central bankers getting together almost as a ‘trade-union’ … [in response to] political interference.’
Ham, like most political commentators, is all-at-sea when trying to comment on monetary matters. I presume that he meant to say ‘economic growth’ rather than ‘monetary growth’. Certainly the wizards of money – ie the Lords of Finance [in the 1930s, the Bankers Who Broke the World] – believe, or claim to believe, that central bank independence fuels long-run economic growth.
Yet, I have a sneaky suspicion that Ham meant what he said. In the mercantilist worldview, a worldview upheld by President Trump, ‘monetary growth’ and ‘economic growth’ are tantamount to the same thing. New Zealand’s Prime Minister, Christopher Luxon, is also a businessman who believes that making hard-won money represents the economic purpose of human life.
In the golden age of mercantilism, from around 1500 to 1800, money was understood to have been legitimately made by mining, exporting, or stealing. (Queen Elizabeth the First was the monarch best known for having resorted to the latter; she boosted the Royal navy for that purpose.) In this view, only mining represents a legitimate addition to the global money supply. Kings and Queens however sometimes resorted to a fourth method, ‘debasement’; modern monetary bankers are still fighting that battle of yore, with ‘public debt’ representing their principal concept of debased money.
On the ‘other side of the coin’ from monetary philosophers – or is it the ‘other side of the ledger’ – there were accountant bankers. One of their clever tricks was double-entry bookkeeping. Another closely related trick was fractional banking. These (along with a clearing-mechanism developed from medieval Italian banking) became the central technologies of modern banking practice. (Many of the earliest bankers were goldsmiths, who on-lent other people’s gold and silver deposits – albeit by issuing receipts, the forerunners of paper money – without telling the depositors. When in trouble, these fractional moneylenders required a fast horse, and contacts who could smuggle them out of the country! The final piece of the modern-banking puzzle was limited-liability status, facilitating an appropriate amount of risk-taking. These are the initially-disreputable technologies that lubricate capitalism and give it its dynamism. Bankers were not alchemists trying to make money independent of the economies it serves.)
Re Urquhart-Stewart, he emphasised the role of confidence – ie belief – in monetary policy. A word widely used by monetary economists is ‘expectations’. Thus, the role that twentyfirst century monetary authorities have assumed is to manage public expectations, even if they have to resort to some kind of poker trick to do so. An important part of this is to maintain a druid-like sense of authority; to tell a good collegial story – not necessarily an accurate story – in order to give themselves an arcane aura of credibility. Democratically-elected politicians – among others – are required to believe their story.
This may be the first time that Urquhart-Stewart has been aware of central bankers getting together as a union or college or guild; but their recent “joint statement” is by no means their first rodeo. Central bankers of the world – like staunch cowboys – regularly get together at a place called Jackson Hole in Wyoming, USA. (And the lords of finance of the late 1920s – the preeminent central bankers of the United Kingdom, United States, France and Germany – were all in regular contact with each other.) On this note, New Zealand’s own Reserve Bank governor, Anna Breman, was one of Urquhart-Stewart’s unionists; and, for her efforts, she had her fingernails clipped by Nicola Willis. (In the recent state of New Zealand’s political cycle, Willis and Luxon have been more in Trump’s camp than in Powell’s, expressing frustration with an unnecessarily slow process of lowering interest rates. This runs counter to their position in the summer of 2023/24; then the new government’s first act in Parliament was to raise the monetary policy bias in favour of generally higher interest rates.)
In the earlier days of central banking, central bankers were more likely to have been well-connected bankers. Nowadays they are more likely to have been economists, specialising in monetary economics and finance. The division between these two cultures goes back at least as far as to the disputations in the 1840s and 1850s between the economists’ Currency School, and the bankers’ Banking School. While the Banking School may have had the better of the argument, as demonstrated by the ongoing development of monetary practice, the Currency School won the culture war.
Before I go on to reveal economist David McWilliams’ substantial contribution to the Al Jazeera programme, we should note that the setting of interest rates through monetary policy is a fundamentally interventionist overriding of the market determination of a price; it represents an exception to the sanctity of the price-mechanism which is fundamental to economics. Neoliberal anti-interventionists tend to show strong support for interest rate intervention; just not intervention by kings or queens or presidents or ministers of finance; they favour intervention by someone they have confidence in. It is part of a wider belief on the part of economic liberals that it is good for our health that money (unlike sugar) should always be scarce; and that the technocratic authorities, if they must err, should err on the side of money being too scarce.
David McWilliams’ ‘Testimony’
I transcribe McWilliams several contributions to the Inside Story programme:
Contribution One: “I’m speaking to you as a former central bank economist … authoritarian leaders from Nero to Lenin, from Hitler to Henry VIII have always tried to interfere with who prints the money, who gets the money and at what price. … This issue is about who gets to set the growth rate of the American economy. Is it the Federal Reserve or is it the President? … Typically, it is the Federal Reserve that gets to set the growth rate, consistent with a low rate of inflation, is going to be X, and were going to drive our monetary policy and our rate of interest according to that. Politicians are always wanting to put their foot down on the accelerator, more growth, more election success, more people feeling good in the very short term. Central bankers push their foot down on the brakes … because we are worried about the rate of inflation. … The central bankers get [their extraordinary power] because they are concerned about the long-term rate of inflation. Politicians are not concerned about the rate of inflation, and as a consequence they want things to accelerate quicker. … The rate of inflation, which affects poor people more than rich people, will go up. The long-term rate of interest, which affects your mortgage rate, will go up. I think, for the world in general, the idea that the people who actually manage and preserve the integrity of the US dollar are no longer concerned about the integrity of the dollar and much more concerned about short-term politics; that will scare people, not just in the High Street, but also in financial markets.”
Re “printing money”, it’s an intentionally pejorative label for money creation through banking based on double-entry book-keeping. Before ‘printing’, there was ‘minting’, which has been the necessary historical privilege of all kings; not just Nero and Henry VIII. McWilliams conflates printing with minting. When money was principally coins, it was the ‘head’ of the king on the coin that gave the public confidence in that coin; the minted coins represented the liability of the kings to the public. It’s not the place here to comment on the monetary policies of Lenin and Hitler. But, re Henry VIII, I recommend the book Gresham’s Law, by John Guy. Thomas Gresham served as banker to four of the Tudor monarchs, in the middle decades of the sixteenth century. Securing additional public debt for Henry VIII – ie, additional to the minted coinage – could be a difficult and hair-raising experience; actually tantamount to smuggling.
McWilliams posits that the technocratic monetary Tzar, Powell, has – and should have – the power to “set the growth rate of the American economy”. This assertion is problematic in that it is neither accurate nor democratic. Attributing the GDP of the United States to one man does a huge disservice to the other 330 million Americans, and grants Powell more concentrated power than Nero ever had. McWilliams doesn’t mention the word ‘productivity’ once, which is unusual for a media economist; it is more common to hear that long-term growth is determined by productivity than by central banks.
McWilliams goes on to say that elected politicians want economic growth rates higher than what monetary economists think they should want, effectively claiming that democracy is inherently inflationary, that inflation is the greatest of all economic sins, and that “politicians are not concerned about inflation”.
The whole discussion reveals overemphasis on a false conflict or dissonance between ‘long-term’ and ‘short-term’. In reality the long-term is no more than a sequence of short terms. We, all of us, all the time, live in the short-term.
His incorrect argument that inflation adversely affects poor people more than rich people is patently false, made most obvious by the facts that higher interest rates clearly favour the receivers of interest, and that past inflation has played a major role in establishing the wealth of today’s rich. We should note that active ‘inflation-fighting’ does not necessarily mean that prices become lower than they would otherwise be; central bank inflation-fighting is a costly process that contributes to the cost-of-living. If we are constantly inflation-fighting in the short-term, and the long-term is a succession of short-terms, then the cost of inflation-fighting becomes a ubiquitous presence in our lives.
Basically, his argument is that if we [ie people like himself] don’t put interest rates up [in the short-term] then interest rates will go up [in the long term]. We need to raise interest rates in order to lower interest rates, he claims. This illogical argument is essentially that inflation necessarily connects low interest today with high interest tomorrow (and vice versa); that interest rates act like an unlubricated seesaw in which one end is labelled ‘short-term’ and the other end is labelled ‘long-term’.
In his last two sentences above, McWilliams claims that a political appointee to replace Powell – compared to a career appointee – would undermine the “integrity of the US dollar”. There is a sense that the US dollar should be the master of the world economy, not its servant. By the way, all appointments by politicians are political; democracy is political.
Contribution Two: “Central backers are charged with – dully obsessed with – the rate of inflation. The rate of inflation is in effect the value of your take-home pay. … The second thing is of course ‘distribution effects’, who pays most. What you find is that, when the rate of inflation goes up, poor people pay more than rich people. Because a higher percentage of a poor person’s income is going to be going on basics … everybody is affected badly, but the poor are affected worse. And then the final point is that for anyone who has a mortgage … inflation means that interest rates will go up. Donald Trump is so keen to reduce interest rates because he is an endemic debtor. There’s always a split in the world between those people who are creditors, who lend money, and debtors, those people who borrow money. As a general rule those people who borrow money want the cost of borrowing to be as low as possible. And if you’ve spent your lifetime defaulting, borrowing, defaulting again, then your DNA will be biassed towards lower not higher interest rates. But who rewards the saver if the rate of interest is artificially low?”
Central bankers, but not McWilliams, make a virtue of themselves being dull technocrats.
The rate of inflation is not the value of your-take home pay. Inflation is an increase in prices, not a level of prices. Inflation, meaning a decrease in what a dollar will buy, strictly affects all prices, including wages; and including luxuries as well as necessities. What McWilliams is arguing is that inflation, though itself not about relative prices, nevertheless has a biased impact on relative prices. Relative prices are in fact caused by market forces; changes in the demand for and supply of different commodities and factors of production. Certainly, changes in interest rates represent a change in relative prices, because the rate of interest (comparable to the wage rate) is the price of a factor of production. If inflation is the only thing that’s going on, a four percent increase in prices will be matched simultaneously by a four percent increase in wages, so the value of your take-home pay is unchanged. All inflation does is reduce what a person’s money-in-the-bank will buy, and make it easier for a person to repay debts. It’s true that markets will respond to inflation by raising the money cost of future debt. Do markets really need help from the monetary druids who claim that interest rates should be raised in an interventionist manner, not only in response to inflation but also ahead of what they claim is expected inflation.
The line from people like McWilliams is that debt is akin to a form of sin, whereas squirrelling money away at four percent annual interest is a virtue. This is religious metaphysics, not science. How many people who have made a lot of money did so simply from squirreling away their wages? Not many. Rich people, except those who simply inherited from daddy, incurred debt to become rich. Rich nations incurred debt – private and public debt – to become rich. Debt has played and continues to play an absolutely fundamental role in economic and civilisational development.
Even in nature the squirrels are not rewarded. They earn no interest on their nuts, and they are subject to a ‘use it or lose it regime’. Nuts which are saved for too long become inedible, or simply go missing. Yes, savers should be rewarded when capital is scarce and people with unspent income need to be induced to take investment risks. In the twentyfirst century, however, the world has been awash with private stashes of idle money; central bankers should not be using public policy to serve the interests of the owners of these stashes.
Contribution Three: “Is the institution stronger than the personalities? I think what we are talking about is a power grab, and we know there’s nobody more powerful in society than the person who controls the money. Money is the glue that gels society together. It is an awesome weapon on the part of governments, which is why I suspect central banks have been independent for so long. We’ve largely seen a revolution of the central banks in the 1970s; by the 1990s with the exception of the UK most were independent. … This is about power and the exercising of power; and I would say that money is a far more powerful tool than ideology, than even warfare, than certainly all sorts of other weapons in the hands of presidents. So, what we are seeing here is a man who doesn’t really understand – or isn’t bound by – the rules of the game, so he’s tearing up the rules as we go along. This is a particularly acute tearing-up. Why? Because he’s actually affecting financial markets, corporate interests, Wall Street’s interests, so there may well be a massive pushback. But to answer your question, if there is a patsy at the helm of the Fed it will undermine the credibility of the United States dollar at a time when the dollar is under credible threat. The United States is no longer the overwhelmingly dominant economy in the world; it is technically number one, but it is being gradually dragged back downwards by China and in the long term by other countries as they grow. So, I think President Trump doesn’t understand the exorbitant privilege that the United States has as [having] the reserve currency of the world. There is nothing more powerful than that you can print money for free as the reserve currency, and people have to give you real stuff to buy that currency that you print for free. How amazing a deal is this? And for the Americans to self-sabotage from the White House seems to be the politics of idiocy.”
Here McWilliams reveals the power agenda of the monetary church. Money should be controlled by the church, themselves; not by the people through their elected or unelected representatives. Henry VIII struggled with the Rome-based Catholic Church in the 1530s. Henry won. What we see today, in McWilliams’ words, is the new church in another power struggle; a struggle – possibly a struggle to the death – that the new faith is probably winning. Who should we trust; the king or the church? The “rules of the game”, by the way, were set by the monetary economists – the currency school – of the nineteenth century. Those rules went quiet in the 1930s, but they started to reassert themselves in the 1970s; in the mid-1980s in New Zealand.
McWilliams does understand the power of double-entry bookkeeping as applied to banks – the power to “print money for free”. And he is correct that Trumponomics – Trumpian mercantilism – is an unwitting policy to self-sabotage the United States’ economy. But to transfer power to a college of druids is not the answer, either. Rather, lay people should all be better educated about money; but not so-educated by these monetary Jesuits. Henry VIII was taught statecraft by Cardinal Wolsey. He overthrew Wolsey – his mentor and his tormentor – but was unable to seek, let alone find, a better counsellor; Henry lost his way. Today we have democracy; a civilisation-project that is still immature, a project whose survival cannot be guaranteed. For all Trump’s faults, he is nevertheless more sensitive to ‘the people’ than are the technocrats who, while really serving the church of sacred money, claim to “serve the public”.
Contribution Four: “I would like your viewers to just remind themselves that the key word here is ‘trust’; what keeps money sacred, almost has an alchemic value, is trust. I trust it, you trust it, we trust each other. Now if you chip away at that trust, which is ephemeral, entirely in our heads, you begin to chip away at the very foundations of the system that we all have in, that system remains stable. So once you put the trust in the currency in the hands of somebody who is untrustworthy you begin to open all sorts of dilemmas about what’s the value of money, who prints it, will it buy what it says it buys, and can I save it. These are massive, massive issues.”
I can say here that ‘sunlight is the best disinfectant’, that delegating our credulity to a college of wizards and metaphysicians is not our best way forward. What David McWilliams (and the people he speaks for) says here, while more Hogwarts than hogwash, perhaps belongs in the Age of Aquarius; like Christian Hawkesby’s ‘North Star’ (refer Reserve Bank cuts OCR 25 basis points, RNZ Morning Report, 29 May 2025). That, of course does not redeem President Trump.
In an important sense, McWilliams is correct. Money is free; freer than a piece of paper. But it’s always an accounting liability; a liability incurred by whoever’s signature or head is on it. Neither kings nor bankers have an incentive to overcook the money supply. It’s their heads that are on the line. The secrets are to always have enough money in circulation; and that it is better to err on the side of too much than too little. Value can seemingly be created from nothing; that’s always been so. But money, and any other form of promise, is not itself ‘value’; rather money is a set of claims on value. The alchemy perception is that a piece of paper with a signature – or a metallic disc with a king’s head etched on it, or a deposit entry in a bank account – may have intrinsic value, may in itself be wealth. But no, such things are only promises. If promises are to be kept, then sabotage – including self-sabotage – should be avoided.
(As an aside, it has often been believed that a destructive weapon of war was to flood a country’s economy with credible counterfeit money. The Germans allegedly tried it in the United Kingdom in World War Two, but to no avail. The Japanese also tried it in the Philippines; I have actually seen a case of counterfeit money recovered from a Japanese crashed aircraft in Mindanao, Philippines. Fascinating!)
Conclusion
The monetarists’ essential argument is that if the policy objective is to have future lower interest rates you have to have higher interest rates now. That is, the preventative for high interest rates is high interest rates! (By ‘monetarists’, I refer to the monetary bankers and the growing numbers of ‘finance-experts’ of the new Currency School, distinct from the now-scarce practical banker-accountants of the old Banking School.)
Mysticism about money is rife, and ripe, especially within the guardian church. The Church of Money is a part of the New Technocracy that is surreptitiously overwhelming the institutions of democracy.
Re John Maynard Keynes, on the short-term versus the long-term. Keynes said: “In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again”; meaning that actual life is always lived in the short-term, and that the distinction between the short-term and the long-term is essentially vacuous.
The monetarists’ view is normative; that in the event of an economic stagnation or decline, those who had already built ‘nest eggs’ (portfolios of financial claims) should have priority access to diminished goods and services; priority over the workers and capitalists who would be producing those goods and services. That is, priority access to a diminished ‘economic pie’ should be given to rich old gentlemen and gentlewomen, with the greatest priority to be given to those with the biggest portfolios regardless of how those nest eggs were obtained. This is not a policy to benefit the poor.
Further, the implementation of neoliberal monetary policies – today’s Currency School or Currency Church, which favours intervention on the side of less money and dear money – substantially increases the likelihood of national and global economic decline, in the short-term and in the long-term. Just as a car with insufficient lubricating oil will not go well. Such a car may complete a short run, albeit inefficiently; but it will not complete a long run.
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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.
