{"id":1996021,"date":"2014-07-04T10:48:33","date_gmt":"2014-07-04T05:18:33","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=1996021"},"modified":"2014-09-09T11:59:52","modified_gmt":"2014-09-09T06:29:52","slug":"central-bank-musings","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2014\/07\/04\/central-bank-musings\/","title":{"rendered":"Central Bank Musings"},"content":{"rendered":"

In my recent post Game Theory: Rajan vs. Government<\/em>\"Game<\/a><\/sup>, we saw how the ideal relationship between the central bank and the government is one where neither party gets what it wants, but there’s a stable outcome. Here are a bunch of articles that expands on the conundrum faced by a central bank.<\/p>\n

Interest rate policy is a poor substitute for good regulation<\/h3>\n

“Monetary policy faces significant limitations as a tool to promote financial stability,” Ms. Yellen said in an event at the International Monetary Fund in Washington. “Its effects on financial vulnerabilities \u2026 are not well understood and are less direct than a regulatory or supervisory approach; in addition, efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment.”<\/p>\n

Source: Janet Yellen Signals She Won\u2019t Raise Rates to Fight Bubbles<\/a><\/p>\n

Andy Haldane: Financial markets are nuts<\/h3>\n

Andy Haldane, the Bank of England’s chief economist, explains that central banks have “grown a new arm, macro-prudential regulation” to prevent the markets becoming over-egged with risk.<\/p>\n

He cites the BoE announcing measures to prevent the housing market overheating, last week.<\/p>\n

The financial markets today are nutty, but they’d be nuttier if central bankers hadn’t acted in the way they did since the collapse of Lehman Brothers.<\/p>\n

Source: Andy Haldane agrees markets are ‘nuts’<\/a><\/p>\n

Trilemmas breed instability<\/h3>\n