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Central banks have been involved in the financing of governments since the emergence of the Bank of England in the seventeenth century It has long been recognised that such finance of governments can lead to substantial falls in the value of money and thus in the predictability of its purchasing power and its associated usefulness. A metallic base for money served as a constraint on this until early in the twentieth century, and habit served likewise in many countries until the early 1950s. Habit then broke down. Central bank independence was introduced in part to restore monetary stability. In this article we consider how well that latest attempt has resisted the sharp rise in government spending that followed the COVID-19 pandemic.
