BERKELEY – Imagine two
central banks. One is hyperactive, responding aggressively to events.
While it certainly cannot be accused of ignoring current developments,
its policies are widely criticized as storing up problems for the
future.
The
other central bank is unflappable. It remains calm in the face of
events, seeking at all cost to avoid doing anything that might be
construed as encouraging excessive risk-taking or creating even a whiff
of inflation.
What
I have just described is no mere hypothetical, of course. It is, in
fact, a capsule depiction of the United States Federal Reserve and the
European Central Bank.
One
popular explanation for the two banks’ different approaches is that
they stem from their societies’ respective historical experiences. The
banks’ institutional personalities reflect the role of collective memory
in shaping how officials conceptualize the problems that they face.
