Wednesday, 8 April 2015
Monetary policy is flawed.
Positve Money, the New Economics Foundation and Richard Werner criticised interest rate adjustments in their submission to the Vickers commission a few years ago.
It’s good to see two other powerful voices criticising monetary policy recently. The first is Bernanke. And the second is Bill Mitchell.
A further weakness in interest rate adjustments is that they are DISTORTIONARY. That is (assuming the work at all) they only adjust lending / investment activity, and not non-lending / current consumption activity. That’s a bit like doing a helicopter drop on households inhabited by blondes and redheads, while people with brown and black hair wait for a trickle down effect.