Central Banks Are Powerless
In Today's Economy?
(NO! There's plenty of power. That's what got us into this mess. It just seems powerless when they aren't dealing with the structural problems that have been created. Dr. Lacy Hunt explains .. )
Hoisington's Dr. Lacy Hunt explains how the central banks seem powerless to address the current challenges of an economy characterized by excessive over-indebtedness & disinflation .. "The periods between 1927 & 1939 in the U.S. & elsewhere, & from 1989 to the present in Japan, are clear examples of the impotence of central bank policy actions during periods of over-indebtedness." .. in regards to the Federal Reserve, Hunt suggests 4 considerations why the Federal Reserve will continue to be unsuccessful in engineering increasing growth and higher inflation with their continuation of the current program of quantitative easing (QE):"1. The Federal Reserve's forecasts have consistently been too optimistic, which indicates that their knowledge of how QE operates is flawed. QE obviously is not working in the way they had hoped, and they are unable to make needed course corrections.
2. Debt levels in the U.S. are so excessive that monetary policy's traditional transmission mechanism is broken.
3. Recent scholarly studies, all employing different rigorous analytical methods, indicate QE is ineffective.
4. The velocity of money has slumped, and that trend will continue—which deprives the Federal Reserve of the ability to have a measurable influence on aggregate economic activity and is an alternative way of confirming the validity of the aforementioned academic studies."
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