Capital in the Twenty-First Century

by Thomas Piketty

If Europe created a stateless currency in 1992, it did so for reasons that were not simply pragmatic. It settled on this institutional arrangement in the late 1980s and early 1990s, at a time when many people believed that the only function of central banking was to control inflation. The “stagflation” of the 1970s had convinced governments and people that central banks ought to be independent of political control and target low inflation as their only objective. That is why Europe created a currency without a state and a central bank without a government. The crisis of 2008 shattered this static vision of central banking, as it became apparent that in a serious economic crisis central banks have a crucial role to play and that the existing European institutions were wholly unsuited to the task at hand.