Agree, the myth of the power of interest rates. Archived Message Posted by John Monro on August 1, 2019, 10:11 pm, in reply to "the myth: lower interest rates result in higher growth and higher rates result in lower growth" Having all of us lived through 30-40 years now of monetarist and neoliberal economic reform, one of the sacred tenets of these dogmas is that of the having independent central banks, and giving them a very few tools in which to intervene in the economy. The major tool of course is interest rates. I believe this idea is irrational, because it's not interest rates, long term, that actually have much to do with any economy, but how that economy is run by politicians, by banks, by companies and corporations, by social change, immigration, technology and geopolitical matters. As a means for smoothing out short lived ups and downs of economy, fine, but as a means for ensuring any long term economic benefit, absolutely useless. In some ways this separation has actually made things worse; governments no longer feel obliged to be fiscally and economically responsible as there's always their central banker to pick up the pieces when things go wrong. These are a couple of letters that I've fired off at various times. This one four years ago, Dear Kathryn and team Every month the New Zealand public endures yet another round of pointless discussion ad nauseam on what the Reserve Bank governor is going to do to interest rates. There's no more sense in this than when the sages of old were said to debate how many angels can dance on the head of a pin. The notion that somehow separating the Reserve Bank from the executive and supposing that control of the cash rate was all that this country needed to secure its financial stability was always the most preposterous part of monetary and neo-liberal economic theory. After thirty years of this nonsense, just when will the penny drop with the media that there's something seriously amiss with this delusional system and isn't it long past time that the media started to show a bit more professional scepticism and intelligence, instead of the sad deference to authority that you seem to have adopted instead? Cheers, and this one just the other day: Dear Kathryn and team What is that Adrian Orr knows that we don’t? To lower a record low central bank interest rate to a further record low implies something seriously wrong both with our own economy and with the wider world economy. But he’s certainly not telling us. The cash-rate that is Adrian Orr's main tool for action is like taking a screwdriver to build a house, entirely inadequate for purpose. This is the financial quackery of neoliberalism and monetarism. I keep writing to you, Kathryn, about this - every month commentators will spend hours discussing the Bank’s latest interest rate manipulations like the sages of yore discussing how many angels can dance on the head of a pin - just as ridiculous and, apparently, just as useless. There are serious fiscal and economic consequences of this race to the bottom of interest rates, it’s a form of fiscal main-lining and it’s both losing its effectiveness and is manifestly damaging the national body corporate. Here in New Zealand its damaging effects are most apparent in grossly inflated property prices and huge increases in New Zealand’s indebtedness, now over half a trillion dollars, which Adrian Orr is now going to make even more dire; stoking the fires, as it were, of some giant fiscal Ponzi scheme. Does this not all smack of fiscal desperation - so why are you all apparently so sanguine? Along with Trump or Boris or Parisian heat-waves, uber-low interest rates are not normal and are signs of a serious dysfunction, whether political, economic or environmental. . Cheers, https://mises.org/wire/cnn-admits-there-are-serious-problems-central-banks-low-interest-rate-policy https://www.bloomberg.com/news/articles/2019-07-24/storing-up-trouble-why-central-banks-may-only-delay-recession https://www.interest.co.nz/opinion/100796/central-banks-are-only-game-town-maintaining-ultra-low-interest-rates-absence-counter Message Thread: Missing Issues on the Economics of a Fed Rate Cut - Keith-264 August 1, 2019, 11:33 am the myth: lower interest rates result in higher growth and higher rates result in lower growth - mike August 1, 2019, 5:10 pm The reality: growth has stalled, and will soon be a thing of the past, in global sum. So all the old - Rhisiart Gwilym August 1, 2019, 6:56 pm Agree, the myth of the power of interest rates. - John Monro August 1, 2019, 10:11 pm Of course it's sophistry....nm - Keith-264 August 1, 2019, 10:34 pm Re: Of course it's sophistry....nm - John Monro August 2, 2019, 10:36 am Eythenkew!....nm - Keith-264 August 2, 2019, 5:26 pm Sophisticates.. - Gerard August 3, 2019, 12:38 pm   Searching