By
While the stance of monetary policy
around the world has, on any conceivable measure, been extreme, by which
I mean unprecedentedly accommodative, the question of whether such a
policy is indeed sensible and rationale has not been asked much of late.
By rational I simply mean the following: Is this policy likely to
deliver what it is supposed to deliver? And if it does fall short of its
official aim, then can we at least state with some certainty that
whatever it delivers in benefits is not outweighed by its costs? I think
that these are straightforward questions and that any policy that is
advertised as being in ‘the interest of the general public’ should pass
this test. As I will argue in the following, the present stance of
monetary policy only has a negligible chance, at best, of ever
fulfilling its stated aim. Furthermore, its benefits are almost
certainly outweighed by its costs if we list all negative effects of
this policy and do not confine ourselves, as the present mainstream
does, to just one obvious cost: official consumer price inflation, which
thus far remains contained. Thus, in my view, there is no escaping the
fact that this policy is not rational. It should be abandoned as soon as
possible.
