Controlling Inflation

See article below. Warnings are going out that central banks across the globe will not always be able to control inflation.

Hmmmm. No one knows, still, how national economies work. There are theories that come into vogue that explain what is going on at the moment they are published. That's for sure.

Econo-girl is reminded of the Army Corps of Engineers trying to reroute the Mississippi River. How well did that work? Remember, the Fed only controls the interest rate charged to banks. Yes, it trickles down to all of us. But they don't control prices or inventories. And they don't control what we buy.


1 comment:

The Lazy Iguana said...

It is all a crock. Lowering the rate that the FED charges to banks also lowers the rate given to savings accounts and CDs.

And then with cheaper loans, people think they can spend more. But what happens when the fecal matter hits the air circulating device?

People are in debt, and lack the reserves to handle a spike in rates. The house of cards collapses.

By the way, the days when the FED can simply change the rate they charge to banks assumes one thing that allows it to "work". That consumers have a choice in banks. So what happens when there is only one huge bank?