In the latest IMF Finance and Development journal (March 2023), there is an interesting article by the former governor of the Bank of Japan, Masaaki Shirakawa – "It’s time to rethink the foundation and framework of monetary policy". It goes to the heart of the complete confusion that is now being demonstrated by central bank policy makers. With their ‘one trick pony’ interest rate attacks on inflation, not only have they been inconsequential in dealing with that target (the so-called price stability responsibility), but, in failing there, they have undermined the achievement of the other central bank target (financial stability) and probably worsened the chances of sustaining the third target (full employment). Sounds like a mess – and it is. We are witnessing what happens when Groupthink finally takes over an academic discipline and the policy making space. Blind, unidirectional policies, based on a failed framework, steadily undermining all the major goals – that is where we are right now. And not unsurprisingly, those who have previously preached the doctrine are now crossing the line and joining with those who predicted this mess. And, as usual, the renegade position is somehow recast as we knew it all along’ when, of course, they didn’t.
Bill writes that monetary policy doen't work, anywhere; and fiscal policy does work, at least in Japan.
He goes on to say,
. . snip out alot . .
Dare mention the idea that governments should use fiscal policy to reduce unemployment or provide cash transfers to the poor to lift them out of poverty and the screams were/are deafening. All the noise about insolvency, skyrocketing interest rates, bond market retaliation, inflation and intergenerational debt burdens reached/reaches crescendos whenever that sort of fiscal policy use was/is suggested. But enter a bank in trouble and the fiscal largesse in the trillions can’t get out the door quickly enough.
Of course, I see that as the rich getting richer by keeping/making the poor desperate, and then the rich getting bailed out whenever they need it. However, the rich don't really need it to remain rich, they just need it to avoid losing any money, when or because they screw up.
The link to the article by the former BOJ Governor
https://www.imf.org/en/Publications/fan ... -shirakawa