The Phaserl


Central Bankers Still Don’t Get It

by Logan Albright, Mises:

In the wake of the financial collapse of 2007, central banks around the world run by Keynesian zealots religiously applied the formulas they had been taught would boost aggregate demand and rescue the economy from the brink of total catastrophe. Easy money, going under the euphemistic  moniker of “quantitative easing” was supposed to stimulate borrowing, spending and growth through the mechanism of historically low interest rates.

Predictably, this approach failed miserably, and more than five years later the United States is still struggling with the high unemployment and low growth of the worst recovery in history. While Canada has done somewhat better, in no small part due to its less aggressive monetary policy, there is still a long way to go towards genuine prosperity.  Now, finally, some policy makers are beginning to realize that a different approach is needed. This week, the head of the Canadian Central Bank, Mark Carney, announced that interest rates will slowly be allowed to rise from the current rate of 1% in the future. To call this a modest move would be an understatement, but the fact that, unlike in the United States, the Bank is beginning to move away from the policy of flooding the economy with money in a desperate effort to keep rates artificially low is at least encouraging.

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1 comment to Central Bankers Still Don’t Get It

  • Don

    They create money out of nothing. We trade our lives for it. They end up owning nearly all the real stuff. eg houses, oil wells, farms, gold, minerals, mines….They ‘get it’ just fine. We are the ones that don’t get it by allowing this to happen.

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