Monday, November 12, 2012

Central banking

Central Banking: What Is It Good For?

While the failure of fiscal policy is widely recognized, monetary policy still enjoys credibility, not only among policy makers but also with professional economists. Yet deeper investigation shows that monetary policy is like shooting in a dark room. Disaggregating the highly aggregated variables of standard monetary economics reveals that monetary policy suffers from a profound pretense of knowledge. When central banks are not able to fulfill their claim and promote economic growth, employment and price stability, the question comes up what the real mission is that they are after. The Federal Reserve System was founded in 1913 with the intention to safeguard the big players of the financial system. After a period when central bankers claimed that they would also promote prosperity we are now back at the old paradigm...."
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