“Pop­ulist ar­gu­ments against easy mon­e­tary pol­icy are flimsy, at best. But so are pop­ulist ar­gu­ments for tight­en­ing mon­e­tary pol­icy – in the US”

Financial Mirror (Cyprus) - - FRONT PAGE -

the top. These are big changes, and of­fer i mpor­tant con­fir­ma­tion that lower-in­come fam­i­lies are fi­nally shar­ing in the eco­nomic re­cov­ery.

The un­con­ven­tional mon­e­tary poli­cies of re­cent years may also have some new ef­fects. Low in­ter­est rates have lately been squeez­ing banks’ prof­its. In Europe, this has be­come par­tic­u­larly pro­nounced, be­cause banks are un­able to pass neg­a­tive in­ter­est rates on to de­pos­i­tors. Any sel­f­re­spect­ing pop­ulist should like this squeeze on banks, es­pe­cially one who is still an­gry about the 2008 global fi­nan­cial cri­sis.

Ul­ti­mately, easy money prob­a­bly does more to re­duce in­come in­equal­ity than to ex­ac­er­bate it – an observation sup­ported by econo­met­ric es­ti­mates. None­the­less, it is not a par­tic­u­larly re­li­able tool for balanc­ing in­come dis­tri­bu­tion. That should not be sur­pris­ing: en­sur­ing a more eq­ui­table dis­tri­bu­tion of in­come is not a cen­tral bank’s job.

The Fed and other cen­tral banks are balanc­ing rapid growth not against equal­ity, but against the dangers of fu­ture over­heat­ing and fi­nan­cial in­sta­bil­ity. They view their jobs as man­ag­ing the over­all econ­omy. They are right to do so.

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