There is a limit to central bank manipulation

Thomas Lifson repeats what I keep saying–there is no way that interest rate manipulation and currency debauchery can work forever. The Greeks are pipsqueeks. Central Banks have run out of ways to find pixie dust.


One response to “There is a limit to central bank manipulation

  1. The seminal paper to me on macroeconomics is “Statistical Mechanics of Money” by Adrian Dr˘agulescu and Victor Yakovenko [European Physical Journal B 17, 723 (2000)]. It discusses the fundamental nature of money in a paradigm that is as basic as Einstein’s photons. To those of us who understand statistical mechanics in the first place, it is as obvious a parallel as can be.
    Basically, an economy is a dynamic system of a statistically HUGE number of participants in equilibrium. Any directed effort (changes in taxes, interest rates, or business rules) by any player with a statistically significant role (governments, central banks, etc.) disturbs the equilibrium with consequences as unpredictable as trying to forecast in detail the shapes of clouds.
    Deliberate disturbances of the equilibrium can only cause turbulence (turmoil) and uncertainty. The short term consequences are always negative, and the only possible long-term positive outcomes are associated with restraint.

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