Several folks have told me that my article today, "The Fed," is a frightening fictional portrayal of what could happen with a Fed takeover —but not proof that a White House takeover could really unfold that way. Fair point. So let’s set the story beside the record. What follows are documented episodes—Ankara, Buenos Aires, Budapest, Harare, Caracas, London—where leaders bent monetary policy to politics and markets did what they always do: punish credibility gaps first in yields and exchange rates, then in living standards. When central banks become political, these aren’t outliers; they’re the baseline, not the anomaly.
Independence exists for a reason. In March 1951, the U.S. Treasury and the Federal Reserve struck the Accord that, in the Fed’s own history, “separate[d] government debt management from monetary policy,” ending wartime yield pegs and creating a modern template for autonomy. That separation is the institutional answer to fiscal dominance—the dynamic Sargent and Wallace mapped in 1981, where, absent fiscal backing, tighter money today can simply mean higher inflation tomorrow. Credibility is the scarce asset; the Accord’s point was to protect it.
Turkey shows how fast credibility can evaporate when politics grabs the wheel. From 2018 to 2021, President Recep Tayyip Erdoğan repeatedly ousted central-bank leaders while insisting rate cuts would cure inflation. The market’s verdict arrived in real time: after new pressure to cut into rising prices, the lira “nosedived more than 15%” on Nov. 23, 2021, as ordinary Turks told reporters their “household budgets” and “future plans” were in turmoil. A recently fired deputy governor, Semih Tümen, pleaded to end “this irrational experiment.” Earlier, when Erdoğan abruptly removed Governor Naci Ağbal in March 2021, the currency plunged toward record lows within hours. The channel is mechanical: a politicized bank raises policy uncertainty → term premia widen → the currency sells off → inflation pressure intensifies.
Hungary traveled a legal road to the same place. After 2010, statutory changes drew EU fire: the European Commission launched infringement proceedings in January 2012 on the grounds that the new framework threatened the central bank’s independence; it closed the case that July only after amendments.