Ultra-Easy Money: Digging the Hole Deeper?

William R. White ()
Additional contact information
William R. White: Monetary and Economic Department

Business Economics, 2016, vol. 51, issue 4, No 2, 188-202

Abstract: Abstract The global situation we face today is arguably more fraught with danger than was the case when the crisis first began. By encouraging still more credit and debt expansion, monetary policy has “dug the hole deeper.” The fundamental analytical mistake has been to model the economy as an understandable and controllable machine rather than as a complex, adaptive system. This mistake also implies that the suggestion that central banks should necessarily reduce the “financial rate of interest,” in response to a presumed fall in the “natural rate,” is overly simplistic. In practice, ultra-easy policy has not stimulated aggregate demand to the degree expected but has had other unexpected consequences. Not least, it poses a threat to financial stability and to potential growth going forward. Further, “exit” threatens to be delayed in many countries, underlining the dangerous fact that the global economy has no nominal anchor. Much better would be policies, introduced by other arms of government, that would recognize that the fundamental problem is not inadequate liquidity but excessive debt and possible insolvencies. The policy stakes are now very high.

Keywords: monetary policy; debt; financial markets; exit strategy (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1057/s11369-016-0012-2 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:buseco:v:51:y:2016:i:4:d:10.1057_s11369-016-0012-2

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11369

DOI: 10.1057/s11369-016-0012-2

Access Statistics for this article

Business Economics is currently edited by Charles Steindel

More articles in Business Economics from Palgrave Macmillan, National Association for Business Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().