Jeffry Snider has one of his interesting if prolix posts at RealClearMarkets. It begins brightly enough:
Ultimately what anyone wants is not all the growth we can manage in a short period of time, rather the necessary aim is sustained maximum growth over a very long stretch. Monetary control of this type, according to the concept, is a very important control rod so as to ensure the second, healthy version of economic expansion.
That’s what everyone believes, anyway.
The Federal Reserve is right now undertaking just such a policy adjustment. In the view of its econometric models, the US economy is facing “balanced†risks; which simply means that it is as likely to take off as fall down. Those risks are, in the official interpretations of modeled economic simulations, in the process of becoming more unbalanced – in favor of the upside. Thus, rate hikes.
This would be a very welcome change. It’s not just that risks have been unbalanced the wrong way for so long, it’s that it hasn’t been limited to just forecast risk.
but then becomes a bit turgid. If I understand his point correctly, it’s that central banks and big banks more generally are in the process of sinking the global economy to maintain the lifestyle to which they’ve become accustomed.
All I have to contribute is a point I’ve made before. We don’t have the tools to manage banks in a global economy. There are basically three alternatives. We can develop the tools to manage the Systemically Important Financial Institutions which will necessarily interfere with national sovereignty, something for which there is no appetite on anybody’s part. We can insulate ourselves from the actions of these SIFIs which would mean unravelling most of the economic globalization that has taken place over the last 30 years, another choice for which there is no appetite on anybody’s part.
Or we can just take our lumps. I’m betting that’s what we do. I mean, we can’t have Jamie Dimon (net worth: $1.23 billion) losing money, can we?
