It is a strange phenomenen that we live in the West in 'deomcracies' but virtually every country has a central bank. The key for all central banks is that they are private- they are not state owned nor even state managed. This is a legacy from their establishment by the Rothschilds and other wealthy families a couple of centuries ago when money was desperately needed to fight wars (these families never founded the banks, but they rather helpfully at the ime put up all the money!).
Countries with independent central banks are generally held to be more stable in the international political economy. The Banks act as a buffer against populist or crazed politicians.
However, this means they can also do things that are themselves risky and there is little oversight. The Federal Reserve in the US decided to expand its balance sheet by $5 trillion during the 2008/9 crisis - five times what Congress approved on the 'bailout' which was the main political discussion at the time.
Just today we can see the effects of central bank. Greece has been making conciliatory noises for the past week about debt restructuring and playing nicely with the EU and Germans, despite Syriza sweeping to power.
In London the new finance minister got a good reception, less good in Germany but they did hear him out. Yet today he has met with Mario Draghi at the European Central Bank. Things have not gone well, straight after the meeting the ECB has withdrawn the right to use Greek bonds as collateral for Greek Banks which has meant a 300% increase in their borrowing costs.
Clearly, Draghi is sending a message that the Greeks need to negotiate in good faith with the ECB and EU.
But who elected Draghi? Why should the ECB be allowed to take actions that are not sanctioned by the Euro nations?
Central banks, although independent are situated in a Country. It is hard to imagine the Bank of England really acting against the best interests of the UK economy - of course, we know it makes makes mistakes the whole time, but there is no intent here, just incompetence.
The ECB is a more dangerous institution, it is not beholden to anyone or anything and yet is the most powerful institution in the EU. How powerful and monomaniacal we will find out in the next few months as the new Greek debt crisis unfolds.
