The drone capabilities of interest rates

For decades interest rates have been the “snake-oil” of economics, a cure all. Now they will act just as drones do for military operations: “it gets in all of the cracks”. Hilsenrath reports:

Third, there is the Jeremy Stein argument. In some cases monetary policy — i.e. higher interest rates — might be the preferable tool for addressing bubbles and threats to financial stability. That’s because monetary policy finds problems that regulators can’t.

… As Mr. Stein, a Fed governor, said last year, “while monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation–namely that it gets in all of the cracks.”


2 thoughts on “The drone capabilities of interest rates

  1. Whenever I see ‘monetary policy as financial regulatory instrument’ argument, I wonder how they think central banks contain negative impact of bubble pricking within certain asset prices. Just wonder what those people really think.

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