Making Money: An Insider's Perspective on Finance, Politics, and Canada's Central Bank

In Making Money, John Crow puts aside centralbankese and writes in a plain style that is a real pleasure to read, provided of course that you are not on the receiving end of his caustic wit. This book provides the most frank inside account of the workings of a central bank since the 1954 publication of Emile Moreau's Souvenirs d'un Gouverneur de la Banque de France, which recounts the history of the stabilization of the franc following its World War I inflationary decline. Crow's book is destined for similar status as a cult classic among central bankers, but it also deserves a wider readership among those interested in monetary policy. Making Money is not a memoir in the traditional mode. In his book talks, Crow is quite contemptuous of what he calls the "Country Living" approach to central banking such as was epitomized in the January 2003 Report on Business Magazine profile of current Bank of Canada Governor David Dodge. In contrast, Crow takes pride that his book provides a serious treatment of the Bank of Canada and monetary policy and does not gloss over the hard, controversial technical issues at the heart of monetary policy. John Crow left his successors at the Bank of Canada an important asset, a high degree of credibility for its monetary policy. This has allowed Canadian interest rates to decline to U.S. levels or even below and been an important factor behind the good economic performance of the last decade. With consumer price inflation already near 4 per cent and still on the rise, Making Money provides good advice on how not to blow it.

John Crow passionately argues that the central bank of a small open economy like Canada should focus on maintaining the purchasing power of Canadian money, independent of political influence. He sees little room to be "flexible" and accommodate inflation, simply because it is sometimes seen as the grease that makes the system run smoother politically, for a while. Making Money advocates the need to run public policy by strong long-term principles, and not to succumb to situational convenience. Because of his uncompromising "stubbornness", John Crow is often painted as the Grouch that stole fiscal policy Christmas, without much debate over whether it needed stealing. Much of this book is about exercising leadership: how much should leaders lead, and how much should they follow perceived popular opinion. As it relates to the Bank, if the governmnet is not willing to take the heat for running sound monetary policy, maybe it’s best to define its goals, and place it off limits, to avoid temptation by political Siren songs. The obvious issue then becomes who should interpret the mandate.John Crow critics may see Making Money as confirmation that he saw too much black and white and not enough grey. Yet, in 1987, in an inflationary environment with weak fiscal leadership, having a single minded central banker who abhorred grey had its advantages. If John Crow had not existed we would have had to invent him.