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IMHAL

Is It Time To Let Robots Control Central Banks?

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Given that central banks seem to do more harm than good, they are influenced by politics to a lesser or greater extent, are ruled by their emotion and fear and are always wrong - then surely the time to let AI and robots control interest rates has come of time.

No emotion, no politics and excess lending when it suits, no bluff and double bluff. Just nice stability.

IF (stuff is getting out of control) interest rate + 0.5% While interest rate is less than 15%; Return Interest rate

IF (stuff is slowing down) interest rate - 0.5% while interest rate is greater than 4%; Return interest rate

Simples.... now where is my £750k p/a

In addition - if the above had of been enacted we would never have been in the position where so much lending had occurred that we would have had to have bailed out banks - then again all those that have benefited from QE would not have done so either.

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there is no need for a central bank in a free market. Ai or otherwise.

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there is no need for a central bank in a free market. Ai or otherwise.

But that would be denying me my £750k pa and then how would I help with trickle down thingy?

In a free market you say? Sorry does not compute - not in the reality we live in.

Edited by IMHAL

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Just shut down the central banks. We don't need them. They do nothing of any use.

there is no need for a central bank in a free market. Ai or otherwise.

Free markets are incapable of self-regulation which makes them prone to bubbles, manias and crashes.

We had a free market in debt production and derivatives prior to 2007. It failed spectacularly.

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Given that central banks seem to do more harm than good, they are influenced by politics to a lesser or greater extent, are ruled by their emotion and fear and are always wrong - then surely the time to let AI and robots control interest rates has come of time.

No emotion, no politics and excess lending when it suits, no bluff and double bluff. Just nice stability.

IF (stuff is getting out of control) interest rate + 0.5% While interest rate is less than 15%; Return Interest rate

IF (stuff is slowing down) interest rate - 0.5% while interest rate is greater than 4%; Return interest rate

Simples.... now where is my £750k p/a

In addition - if the above had of been enacted we would never have been in the position where so much lending had occurred that we would have had to have bailed out banks - then again all those that have benefited from QE would not have done so either.

That was supposed to be the plan when the BoE was given its "independence" in setting interest rates. It's what they claimed would happen. Another failure of a plan.

If there must be central banks (not convinced of that of course) then robots couldn't do any worse.

Two lines of code would pretty much cover it.

Edited by billybong

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Free markets are incapable of self-regulation which makes them prone to bubbles, manias and crashes.

We had a free market in debt production and derivatives prior to 2007. It failed spectacularly.

That's the whole point though, isn't it?

No amount of control can avoid the undisputable fact that every aspect of the universe has ups and downs.

Better to keep it a free market so folk understand that there is inherent risk and what goes up doesn't just go up.

Sh!t happens. Lessons need to be learned. The beauty is that every generation will produce a fresh set of investors. Some win, some lose in a more natural cycle rather than what we have now.

In all of life, busts are unavoidable.

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We had a free market in debt production and derivatives prior to 2007. It failed spectacularly.

How did it fail? The market in 2007 was about to teach investors via falling asset prices and debt defaults that you shouldn't lend people mortgages that are too big for their means if you want them to be repaid. It was also going to teach investors that they should do their homework and not buy derivatives that are too complicated. These are both important lessons that would have encouraged more rational behaviour from market participants in the future.

The failure came when governments and central banks stepped in and flooded everything with moral hazard.

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Free markets are incapable of self-regulation which makes them prone to bubbles, manias and crashes.

We had a free market in debt production and derivatives prior to 2007. It failed spectacularly.

A market is the buying and selling of things we make. It is limited by how many of the things we make and by who wants to buy those things...nothing in this market is infinite, nor does it cost nothing to make them.

Debt and derivatives are not things, they dont require effort to make, and can be made to infinity...just imagine them, and they exist.

Central banks allowed this to happen.

Edited by Bloo Loo

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I get the 'free market' crowd - but still have the feeling that even free markets can get into disequilibrium, probably quite far, even dangerously far from equilibrium - and maybe just maybe having interest rates nudged either way when things get heated or too cold is a way to bring things back into line quicker than would have otherwise been the case.

That was the general idea behind Central Banks in the first place before they morphed into 'we will not tolerate a bust no matter what', 'keep the punch bowl out at all cost', 'bring out the PUT whenever things look like they are about to correct' and 'print as much money as it takes' merchants - ie political puppets.

So a simple algorythm would save money as well as economies.

Edited by IMHAL

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It might not be for central banks yet but a lot of big IT companies are working towards banking automation. It is one industry I would be worried if I was in as its a hell of a lot easier to fully automate than truck driving.

Google are working on some investing AI which will out perform a human.

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Free markets are incapable of self-regulation which makes them prone to bubbles, manias and crashes.

No. The natural fluctuations of free markets are just that - natural and part of the correct and proper operation of markets.

What we have had for the last 50 years are nothing like free markets at all. Central banks have created and engendered larger and larger crashes through their pathetic attempts to control. The problems are being CAUSED by the central banks. They create massive distortions in credit and the waves are getting larger and larger each time. This will lead to the destruction of the entire system unless their habits are voluntarily abandoned.

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Given that central banks seem to do more harm than good, they are influenced by politics to a lesser or greater extent, are ruled by their emotion and fear and are always wrong - then surely the time to let AI and robots control interest rates has come of time.

No emotion, no politics and excess lending when it suits, no bluff and double bluff. Just nice stability.

IF (stuff is getting out of control) interest rate + 0.5% While interest rate is less than 15%; Return Interest rate

IF (stuff is slowing down) interest rate - 0.5% while interest rate is greater than 4%; Return interest rate

Simples.... now where is my £750k p/a

In addition - if the above had of been enacted we would never have been in the position where so much lending had occurred that we would have had to have bailed out banks - then again all those that have benefited from QE would not have done so either.

Since the financial crisis was in large part due to failed algorithms in the financial sector the answer is clearly no.

Moreover computers are not democratic whilst central banks probably should be under increased democratic/fiscal control at least from time to time.

Claim that central banks were "cause" of financial crisis or a "problem" or that robots wouldnt be is in itself a bias.

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That's the whole point though, isn't it?

No amount of control can avoid the undisputable fact that every aspect of the universe has ups and downs.

Better to keep it a free market so folk understand that there is inherent risk and what goes up doesn't just go up.

Sh!t happens. Lessons need to be learned. The beauty is that every generation will produce a fresh set of investors. Some win, some lose in a more natural cycle rather than what we have now.

In all of life, busts are unavoidable.

Thats like saying if you get cancer or have a heart attack - tough luck. We have moved on since the 17th century thankfully.

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Thats like saying if you get cancer or have a heart attack - tough luck. We have moved on since the 17th century thankfully.

what? An imaginary organisation created to protect imaginary numbers in an imaginary system, is the same as real technical advances in reality?

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Thats like saying if you get cancer or have a heart attack - tough luck. We have moved on since the 17th century thankfully.

Not to worry. You can still go to the doctor if you feel a bit dickie, or get your car fixed if it breaks.

Societal fixing for the benefit of the few? Pass.

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Since the 1)financial crisis was in large part due to failed algorithms in the financial sector the answer is clearly no.

Moreover computers are not democratic whilst central banks probably should be under increased democratic/fiscal control at least from time to time.

Claim that central banks were "cause" of financial crisis or a "problem" or that robots wouldnt be is in itself a bias.

1)The two things are different - you can't equate investment algos with auto interest rate algos

2) Democratic + political interference = how we got to where we are

Not sure bout your final point.

Edited by IMHAL

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Thats like saying if you get cancer or have a heart attack - tough luck. We have moved on since the 17th century thankfully

I think that's a flawed analogy in a context where the possibility of failure is vital to the long term health of the system. You may be right that the Central Bankers have taken on the role of medics intent on curing the 'disease' of volatility in the system, but their attempts to contain it simply create more violent volatility further down the road.

This is why the 'date driven' Fed is now trapped- it can't do what it must do-rise rates- without unleashing the pent up energy of all the distortions it's own interference has propagated globally.

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