Central bankers from around the world got together last week in Jackson Hole, Wyoming for their yearly monetary mixer. We know they talked a lot about how central bank monetary policies could “help” the world with its economic woes. But there’s one thing we can be sure they didn’t discuss – how many of the world’s economic problems are created by these very same policies. In a new commentary, Steve Forbes analyses six areas about which these central bankers are completely clueless.
- The role of money: Central bankers think money controls economic activity, instead of the other way around. Thus, they believe they can successfully manipulate the economy into real growth with their monetary meddling.
- What money is: Money itself isn’t wealth. Money measures wealth and reflects marketplace activity. Creating more of it is counterfeiting, a.k.a. theft.
- Commerce does not cause inflation: On the contrary, central banks cause inflation when they create more currency.
- Manipulating interest rates is equivalent to price controls: Interest rates are the price we pay to borrow money. Just like any other price, the market should set them.
- The job of central banks is to keep the value of money stable: They have clearly failed at this. The gold standard is the best system ever devised for keeping the value of a currency stable. The whims of central planners have failed over and over, and nothing will change this time around.
- Monetary policy can’t cure an economy’s structural flaws: Taxes, regulations, and labor laws are suffocating economies all throughout the world. Even if central bankers were able to overcome the failures of central planning through monetary policy, they could not overcome the barriers of regulations.
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