Rudi Dornbusch summarizes the consensus position on monetary policy; it’s all about “getting rid of democratic money.”

I think this was fair statement of the general view economists when he wrote this in 2000, and for most of the time since then.

http://web.mit.edu/15.018/attach/Dornbusch,%20R.%20Essays%201998-2001.pdf

The euro is obviously the outstanding example of insulating money from democratic control, so it’s no surprise Dornbusch used similar language in praise of the ECB in a 1999 essay.

This position - which again, has been very widely held - rests on two claims, one economic, one political, both of which are questionable on their own and which stand in direct tension with each other.

On economic side, it's based on idea that what central bank deals with is money, which is an arbitrary numeraire, always neutral at least in long run. The only effect of changing the amount of it is to scale price up or down in proportion. Stable prices is only good it can do.

But this falls apart as soon as we remember that a central bank is dealing with *credit*. The idea of a neutral credit policy makes no more sense than idea of a neutral transportation policy. Loans, like roads, always go somewhere in particular.

Another way of seeing this is that money and finance are *useful* - they allow transactions to take place that would not otherwise. And of course some transactions are more financially demanding than others. So changes to supply of money/credit must change composition of output.

On political side, idea is the voters will consistently reward governments that follow policies that result in excessive inflation. But why do voters behave in this self-defeating way? Why does the general assumption of rational, self-interested behavior fail in this one place?

Critics of loose credit policy going back to 19th C have said stuff like: you can't get richer by printing more currency, any more than you can get taller by changing units on ruler. But only makes appeal of loose money more puzzling. We don't see people voting fo 25 hour days!

And if the idea is to "get money out of the hands of politicians," who then is the argument addressed to? Who is supposed to enter into monetary unions, or to establish independent central banks and appoint their members?

If people "always" vote for something pointless and destructive, that seems less an argument about monetary policy than against democracy in general. Which you can make, if you want to, but it will have to be on some basis other than your professional authority as an economist.

Conclusion requires both premises, but each undermines the other. If exclusive focus on price stability is so unambiguously best for everyone, why is there such consistent support for looser money?