{"id":31280,"date":"2018-02-20T09:07:33","date_gmt":"2018-02-20T14:07:33","guid":{"rendered":"http:\/\/olduvai.ca\/?p=31280"},"modified":"2018-02-20T09:07:33","modified_gmt":"2018-02-20T14:07:33","slug":"the-irresponsible-ecb","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=31280","title":{"rendered":"The Irresponsible ECB"},"content":{"rendered":"
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\"\"<\/picture>Daniel&nbsp;Roland\/AFP\/Getty Images<\/span><\/figure>\n<\/div>\n
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The Irresponsible ECB<\/a><\/h3>\n
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Ultra-loose monetary policy stopped being appropriate long ago, and is especially inadvisable now, with the global economy \u2013 especially the developed world \u2013 experiencing an increasingly strong recovery. As recent stock-market turbulence shows, refusal to normalize policy faster is drastically increasing the risks to financial stability.<\/p>\n<\/section>\n<\/div>\n<\/div>\n

FRANKFURT \u2013 The Dow Jones Industrial Average\u2019s recent \u201cflash crash,\u201d in which it plunged by nearly 1,600 points, revealed just how addicted to expansionary monetary policy financial markets and economic actors have become. Prolonged low interest rates and quantitative easing have created incentives for investors to take inadequately priced risks. The longer those policies are maintained, the bigger the threat to global financial stability.<\/p>\n

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The fact is that ultra-loose monetary policy stopped being appropriate long ago. The global economy \u2013 especially the developed world \u2013 has been experiencing an increasingly strong recovery. According to the International Monetary Fund\u2019s latest update<\/a> of its World Economic Outlook<\/em>, economic growth will continue in the next few quarters, especially in the United States and the eurozone.<\/p>\n

Yet international institutions, including the IMF, fear the sudden market corrections that naturally arise from changes in inflation or interest-rate expectations, and continue to argue that monetary policy must be tightened very slowly. So central banks continue to postpone monetary-policy normalization, with the result that asset prices rise, producing dramatic market distortions that make those very corrections inevitable.<\/p>\n

To be sure, the US Federal Reserve has moved away from monetary expansion since late 2013, when it began progressively reducing and ultimately halting bond purchases and shrinking its balance sheet. Since the end of 2015, the benchmark federal funds rate has been raised to 1.5%.<\/p>\n

But the Fed\u2019s policy is still far from normal. Considering the advanced stage of the economic cycle, forecasts for nominal growth of more than 4%, and low unemployment \u2013 not to mention the risk of overheating \u2013 the Fed is behind the curve.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

Daniel&nbsp;Roland\/AFP\/Getty Images The Irresponsible ECB Ultra-loose monetary policy stopped being appropriate long ago, and is especially inadvisable now, with the global economy \u2013 especially the developed world \u2013 experiencing an increasingly strong recovery. As recent stock-market turbulence shows, refusal to normalize policy faster is drastically increasing the risks to financial stability. FRANKFURT \u2013 The Dow […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[233,282,418,434,18731,534,535,8402],"class_list":["post-31280","post","type-post","status-publish","format-standard","hentry","category-economics","tag-ecb","tag-european-central-bank","tag-imf","tag-international-monetary-fund","tag-jurgen-stark","tag-monetary-policy","tag-monetary-stimulus","tag-project-syndicate"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31280"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31280\/revisions"}],"predecessor-version":[{"id":31281,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31280\/revisions\/31281"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}