By serving private capital markets rather than citizens and taxpayers, central banks are a major obstacle to meaningful climate action. Half a century after US President Richard Nixon and his advisers reshaped the international monetary system, now we must transform it again.

LONDON – Fifty years ago, a US president shut down the gold window, ended capital controls and ushered in a new era of global finance. The “Nixon shock” overnight reshaped the international monetary system, then gradually changed the status of central bankers. Instead of acting as servants of the national economy, monetary decision makers have become masters of the globalized and financialized world economy. And this development relates directly to our ability to cope with the problems of climate change and biodiversity loss.

Despite their technocratic mystique, central bankers are politically appointed officials on government payrolls and still derive their authority from the taxpayers of their respective jurisdictions. As the former Deputy Governor of the Bank of England, Paul Tucker, observes, “the right to create money is always latently a power to tax.”

The status and constitutional role of central bankers is therefore above all a democratic question, and not an economic or technical one. As managers of public institutions that hold a monopoly on issuing currency and liquidity, they have impressive and powerful instruments that can only be deployed because they are backed by public treasuries.

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