A Quote by Robert J. Shiller
I think we do need to try to not just rely on the central bank to, in its wisdom, adjust interest rates, but allow for people to avoid being exposed to inflation risk.
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A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.
When you own gold you're fighting every central bank in the world. That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the price of government bonds. And that's why central banks long have tried to suppress the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power.
The risk is that as we come out of this recession, we'll have so much debt to finance, we'll either have to have inflation or very high interest rates to continue to borrow the money, or both. That's a risk.
Of course, looking tough on inflation is part of any central banker's job description: if investors believe that inflation is going to get out of control, you end up with higher interest rates and capital flight, and a vicious circle quickly ensues.
So: if the chronic inflation undergone by Americans, and in almost every other country, is caused by the continuing creation of new money, and if in each country its governmental "Central Bank" (in the United States, the Federal Reserve) is the sole monopoly source and creator of all money, who then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks) itself?
The best way that a central bank can support growth on a durable basis is to ensure inflation is low, stable - there is financial stability - and that is the role that the central bank plays.
The lesson for Asia is; if you have a central bank, have a floating exchange rate; if you want to have a fixed exchange rate, abolish your central bank and adopt a currency board instead. Either extreme; a fixed exchange rate through a currency board, but no central bank, or a central bank plus truly floating exchange rates; either of those is a tenable arrangement. But a pegged exchange rate with a central bank is a recipe for trouble.
A government cannot be expected to allow independence to its central bank unless that bank is also accountable to it and to the wider public. That is, the central bank must be able to be judged on whether or not it has achieved its agreed objective.
I'm just opposed to a pure inflation-only mandate in which the only thing a central bank cares about is inflation and not employment.
If you put tariffs in place, it creates inflation. If you put inflation in place, you have to raise interest rates. You raise interest rates, and stock markets shouldn't be so high.
After a long period in which the desired direction for inflation was always downward, the industrialized world's central banks must today try to avoid major changes in the inflation rate in either direction.
Very deliberately, the central bankers have punished savers, pushing interest rates so low that any truly safe investment - and older people are always advised to play it safe - yields a negative return when inflation is factored in.
The principle that a central bank, charged with controlling inflation, should be independent from the government is unassailable. It may also be true that it's easier for the central bank to guard its independence from political pressure when it mainly holds government securities.
[Australian Reserve Bank] Governor MacFarlane said recently when Paul Volcker broke the back of American inflation it's regarded as the policy triumph of the Western world. When I broke the back of Australian inflation they say, "Oh, you're the fellow that put the interest rates up." Am I not the same fellow that gave them the 15 years of good growth and high wealth that came from it?
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
In a world without an Ex-Im Bank, which finances just 2 percent of U.S. exports, private firms would provide the insurance and credit these companies need, but at market rates that reflect risk of default.
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