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Meddling Will Be Central Banking’S New Mantra

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http://blogs.reuters.com/breakingviews/2014/12/23/meddling-will-be-central-bankings-new-mantra/

Central bankers in rich nations have a new mantra: meddle. In a world of ultra-low interest rates, dormant inflation and uncomfortably high leverage, the monetary authorities have to tinker with anything that can have consequences for financial stability.

The new arrangement doesn’t make many central bankers happy. They much prefer to guide the economic horse using only the gentle whip of interest rates. However, six years after the financial crisis, most economies are still plodding along on a rough disinflationary road. Any crack of the whip could make the horse bolt. The authorities have to control speeds with the complicated bridle known as “macroprudential norms.”

Since this bridle will be around and powerful for a long time, it deserves a friendlier name, perhaps macro-P. The contraption has many parts: from informal guidelines to industry-wide limits on how much can be lent, against what collateral, and to whom. Taxes, to limit price increases in residential property or some other asset class, are an optional add-on. The idea is to directly control any source of potential financial vulnerability, without changing the cost of money.

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Meddling is becoming the new normal.

Hasn't meddling always been the rule for central banks.

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I'm sorry, but who voted for these idiots? I didn't.

Why don't they stick to their job... blowing up the economy with their massive gambling debts... oh no... erm... printing billions and giving it to each other... oh no... erm...

They all need to go to prison, not be given free reign to run entire countries. FFS!

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At its core NuMeddling is an admission of failure as they've lost control of the economy and that's evident through their lost control of interest rates which used to their main lever. It's just there flapping in the wind now - and it's a reflection of just how bad things really are.

They might be able to NuMeddle some other things but they can't/won't control all the inevitably unforeseen and usually negative consequences.

Of course they used to meddle in the past - it's not a new mantra. Who used to set a limit on mortgage multiples of say 3.5 a few decades ago for instance. The only difference was that the economy was that bit more healthy then and the meddling was less overt and it attracted less attention.

They can't escape responsibility by trying to say they're having to get more involved now because things have gone wrong - they were just as involved before.

It goes back to them choosing winners and losers and they've always done that. It also highlights who actually runs the economy (or at least the parts that matter to them) and for whose benefit.

Edited by billybong

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