Going digital and negative

Read the latest edition of ‘Free lunch’: ‘A good week for monetary policy’ and the speech by Andrew Haldane linked in that piece. Here are my comments that I left under the ‘Free lunch’ column:

(1) Thanks for that animated graphic. Very useful.

(2) Clear that policymakers such as Andrew Haldane (for example) and their supporters (such as yourself) are determined to go the full distance with unprecedented and unconventional politics and to hell with financial imbalances and instability that may arise in the process.

(3) When Andy Haldane was in charge of financial stability, he wrote a lot about how banks caused instability. Now that he is on the real economy side, he seems willing not to assign any responsibility to monetary policymakers such as himself for that. Neat example of thinking in silos.

(3) Unprecedented + unconventional = unintended consequences.

(4) Hence, henceforth, growth does not or will not matter because these policy proposals are bound to cause financial imbalances, instability and hence plenty of accidents which will adversely affect growth. So, stop worrying about growth, abandon pursuit of growth and start generating inflation.

(5) That is the message that policymakers seem to have taken from recent BIS reports on how debt ratios have risen since 2008. No deleveraging and yet, no growth. Cannot generate growth but will go all out and generate inflation. Only way to pay is to default on debt.

(6) Some emerging economies have borrowed record sums since 2008 thanks to low rates. Why leave out the other emerging economies that have behaved sensibly? Everyone must join the party and have fun borrowing. Hence, negative rates.

(7) Before embracing technology, pl. advise your favourite policymakers to abandon hedonic pricing and go back to measuring inflation normally. That might solve the problem. May be, it won’t be as much fun as levying tax on holding paper or plastic currencies.

(8) You are absolutely right that the rate rise will be put off a few more times. Both China and financial industry know that scare-tactics work well with Federal Reserve. Volatility is bad. Stability is good. Does not matter if we lose it all in one giant meltdown. What stands between us and recovery is only our imagination.

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