Libertarians, like Marxists and deep greens, generally drive me nuts. Why? Well, they have no objective function outside their beliefs about social organization. Their preferred way of organizing society is good regardless of the outcome ... something especially infuriating when they refuse to admit it, and insist, fairly crazily, that their desired form of social organization will produce good outcomes and we can't compare the “really existing libertarianism” that the U.S. and much of Europe lived under before 1914 (or 1933) because it wasn't perfect super libertarianism. Something about the ICC, or maybe the Homestead Act. I don't know. Aargh.
Megan McArdle is not like that at all. She's a very smart non-doctrinaire libertarian. She certainly makes you think, even when she's infuriating, and I don't get the impression that she would refuse to change her opinions in the face of facts.
Here she isn't discussing libertarianism. Rather, she's thinking about democracy as a way of organizing society. Her conclusion is that small-d democracy isn't compatible with modern central banking, because “what the Fed is doing now is not much different from what most [non-democratic ideologues] want the Supreme Court to do on some issue or another: rule it out of the bounds of majority debate.”
But that's just wrong! The Fed can be abolished at any moment. All you need is 218 representatives, 60 senators, and the president to say so. Less drastically, the Fed's mandate can be changed. In fact, Congress has done exactly that. In institutional terms, the Federal Reserve is not one of the undemocratic parts of the American constitution, for the simple reason that it's not in the American constitution. The only reason that the Fed behaves independently is because there is a democratic consensus in this country that it should.
The Federal Reserve is like the EPA, or OSHA, or the FAA, or the military. A somewhat autonomous organization with a mission set by elected officials, plenty of oversight all the way, and an ever-existent possibility of abolition. I don't see anything undemocratic about it.
Am I wrong?