Charles
Goodhart says in this video that politicians pushed central banks into cutting
interest rates and doing QE. Well you can see why, can’t you?
Reason
is that politicians are deficit-phobes. So they prefer central banks to bring
stimulus because that doesn’t involve deficit. And here’s an illustration of
the logic involved.
If
government borrows and buys some office blocks, that counts as deficit. In
contrast, if the central bank prints money and buys the shares of the firm that
owns the office blocks, that doesn’t count as deficit. (Cue, finance minister
wets his pants, and dances around his office in delight.)
But
in both cases the government / central bank machine becomes the owner of the
office blocks, so there is no effective difference between the two scenarios.
Raving
bonkers, innit?
Hat
tip to Mike Norman re the video.
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