Irish Liberty Forum

Paul Krugman and Central Banks’ Coordinated Action

with 3 comments

The prices of bread, milk, televisions, cars, tractors and factories are all set by the interaction of the supply and demand schedules of millions of individual actors. The price of credit however is set by a few men in suits in a large marble building.

As such, we have no way of knowing whether the price of credit, also known as the interest rate is equal to the price that reflects the market’s requirements. 

The Central Banks of Canada, China, Sweden, Switzerland, the European Union and the United States all lowered interest rates in their respective regions today.  

Central Banks are between a rock and a hard place and must decide between “injecting liquidity” into sagging financial markets and reeling in the inflation that they themselves have manufactured.

Keynesian economist and perennial Nobel Prize candidate Paul Krugman has praised the rate cuts, however claims that

We’re way past the point at which conventional monetary policy has much traction.

With the Fed’s benchmark rate now at 1.5%, the United States may be in liquidity trap territory.

Krugman may be correct in saying that coordinated rate cuts will make little difference, however he fails to present an alternative course of action. It won’t be long before Krugman and his ilk will be advocating massive public works and widescale labour market interventions to “stave off crisis”, rather than waiting for time to heal the wounds.

Another war perhaps, Mr. Krugman?

Advertisements

Written by 20000miles

October 8, 2008 at 10:27 pm

Posted in economics, finance, news, USA

3 Responses

Subscribe to comments with RSS.

  1. […] Irish Liberty Forum appears to be having the same concerns. Possibly related posts: (automatically generated)Bailout fear […]

  2. […] wrong from its very conception. The urgent task for everybody else is to stop these people from inflicting their policies on us for any […]

  3. […] wrong from its very conception. The urgent task for everybody else is to stop these people from inflicting their policies on us for any longer. (cross-posted from the here) __________________ I advocate peace and freedom, […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: