This article by TIME Business & Money discusses issues that Central Banks may be causing. Like our discussion in class on Thursday, the article says central banks are pumping money into the economy and hoping for the best. Though they know what these monetary policies will do, it is difficult to tell the extent. Implantation of monetary policy can cause hyper inflation or spark a recession. Also, it looks like the United States is not the only country using their Central Bank to control the economy.
Japan's use of their Central Bank is discussed heavily in the article. How is Japan different from the United States in regards to monetary policy implementation? What do you believe the FED should do next?
"The reason why Japan has been an economic mess for 20 years, Krugman asserts, is that the government and the BOJ have never gone far enough in pumping the economy back to health." -- With that said, I don't think that pumping money into the economy is the best thing; I agree with the author, that this is all based on an assumption that no serious negative consequences will come about. For example, weakening their national currency (even though the article notes that this is a goal of Abe's plan).
ReplyDeleteFollowing the lines of the article. I also hate to disagree with Mr. Paul Krugman and being negative in the US scenario.
ReplyDeleteNowadays, US is closer and risk to fall in a crisis. However, the proposed solutions are harming the economy. On the one hand, the government spending is rising, but it is not solving anything. It is focused on paying the debts and the paternalistic expenditures. On the other hand, printing money is an irresponsible action. It could generate inflation and lack of confidence by society. It is clear that easy money could create another speculative bubble. We can call it "sovereignty debt bubble" (Time, Business and Money). If we focus on the yen situation. One can see that the yen has fallen on the expectation of more action by Japan's central bank to easy monetary policy (WSJ).