Back To Reality, by Robert Gore

This site spends little time discussing and analyzing central banks’ policies. Some of the media’s preoccupation with central banks reflects an ideological endorsement of command and control SLL does not share. There are people, mostly well-educated, who actually believe that economies with millions of producers, consumers, and businesses, engaging daily in billions of transactions, can be directed by a group of central bank bureaucrats manipulating short-term interest rates and exchanging the government’s debt for their own fiat debt.Historically Efficacious Government and Central Bank Control of Economies is an even shorter book than The Humility of Donald Trump. The titles of both are longer than the contents, but while faith in central banks waxes and wanes, it never dies. Some of the aforementioned preoccupation is journalistic and analytical laziness: it’s easier to speculate and report on central bank statements and policies than it is to determine what’s actually going on with an economy.

SLL devoted two paragraphs to the Fed’s latest move, and the thrust of those paragraphs was that markets had already marked up rates for a substantial segment of borrowers, starting about six months ago, and the Fed, as it usually does, was following the market. The Fed’s zero rate federal funds target took short terms rates lower than they would have been absent that Fed policy. Europe and Japan’s negative interest rates are an even greater distortion from free market rates. However, the global economy was burdened with more debt than it could sustain back in 2008, when the Fed kicked off the global central banks’ easy credit campaign. That excess of debt ensured that interest rates would remain low by historical standards (for the most creditworthy borrowers), whether central banks intervened or not.

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Average Joe
Average Joe
5 years ago

An interesting read but from my somewhat limited knowledge it begs a question, if an entity or entities can print all the money the like or find necessary, use it to buy all of whatever they choose by whatever means they find appropriate at the time, is it wise to suggest they are somehow ineffectual with regards to the economy?

From my perspective fractional banking, ‘central banks’, and the intertwined institutions have a great ability to influence all manner of things and it would seem a bit naïve to suggest otherwise.