Central banks in Canada and the U.S. are under siege. The Bush administration is badgering the Federal Reserve to ease monetary policy, while Congress studies a bill that would, among other things, give the Treasury Secretary a seat on the board. Opposition politicians here in Canada issue repeated calls for lower interest rates, and demand John Crow's head if he refuses.

This has brought forth the predictable huff in response from people like me that monetary policy is not the sort of thing to be entrusted to elected officials. The Economist magazine rebuked the president, saying the Fed's job is hard enough without such distractions. It should be left in peace to do its job, unsupervised, unaccountable, unelected. Similar sentiments have appeared elsewhere in support of the divine right of central banks.

This is a troublesome position for a democrat, however. Roundheads and royalists: isn't there some middle ground here?

Let's not blame the people for the sins of their leaders. It's perfectly legitimate that something as critical in its effects on the economy as monetary policy should be accountable to the public. But it should be directly accountable: involving Parliament or Congress just muddies the issue.

The essential requirement for a sound currency, as for sound government, is separation of powers - in this case, fiscal and monetary. The old reason for this was to counter the temptation to seigniorage: shaving the return on government debt by debasing the currency in which it is denominated.

DROPPING LIKE CANARIES

If the government can no longer dupe its creditors - bonds drop like mine canaries at the first whiff of inflation - it can still cheat its dependents, as witness the Tory habit of de-indexing transfer payments. But this is nickel and dime stuff. The greater worry now is that government debt has grown so bloated as to invite a fullblown fiscal collapse in the event of a recession. Once it becomes known that the monetary authorities will do anything to stave off a recession, it is open season for spiraling wage and price demands . This can end only in hyperinflation.

One could simply state that the central bank is independent of political influence, and that is more or less what both Canada and the U.S. have done. But either this is true, and hence undemocratic, or it is false, and hence worthless. Which is more likely is clear enough. Though both central banks claim price stability as their goal, no one believes it: not the bond markets, still discounting for higher inflation at the long end; not governments themselves, their fiscal plans based on inflation continuing into the next century.

The reason is that the central bank, no matter what its charter might say, lacks the legitimacy to stand up to a democratically elected government bound on inflation. So various other means have been suggested for insulating monetary policy from the corruption of politics: fixed exchange rates, the gold standard, private currencies. The weakness common to all is that they beg the question of political will: any government that could stick to the gold standard could also run a stable monetary policy on its own.

The problem is set. Any sound monetary regime must separate the fiscal and monetary powers. To safeguard that separation, it must offer the monetary power its own base of legitimacy. The only way in a democracy to guarantee that legitimacy is through a popular mandate: a clearly expressed electoral preference for sound money. The solution is clear. Put monetary policy, not on the gold standard, but the vote standard. Elect the Bank of Canada governor.

I hear the skeptics. Would the people vote for honest money? Or would they be swayed by a sweet-talking soft-money salesman? Maybe they would - once. But the best advertising in the world won't sell a bad product twice.

The evidence is that inflation, like protectionism, is not the votegetter its pseudo-savvy proponents contend. Given a choice between double-digit inflation and double-digit unemployment, the public will not hesitate to choose the latter. They may not understand the economic implications of inflation, but they can feel its political message in their bones. Like the graffiti on the New York subway, inflation is a constant, inescapable reminder: no one's really in charge here.

Still, if people did vote for inflation, if that's what they really want, why shouldn't they have it? That, after all, is democracy.