The answers given in the article are pretty shite — standard wokey, establishment elitist blah.

But intellectually speaking, that macro question is a difficult one: per Tinbergen's rule, you need equal number of instruments to match the variables you wanna fix.

(McCloskey #1594630 had a vicious one for Benthamite: can only ever maximize one thing, you moron!)

It can’t be just me who feels there is something off about how we are at present talking about macroeconomic policy.

• "On the monetary side, there is a shift towards tightening almost everywhere"
• "On the fiscal side, it is largely taken for granted that budgets must retrench — urgently, says the IMF — even when that is a view some governments honour in the breach."

yeeees, nothing stops that train eh.

There is a perfectly sensible reason for this, which is that growth has been better than expected and inflation remains persistently above central banks’ targets, much of which is down to what the IMF recognises as a big demand shock from AI investment.

... don't say climate change, don't say climate "crisis"...

But at the same time, we know that we live in a time of frequent and large negative supply shocks, which require greater investments in the structural transformations that will make us less vulnerable to such shocks

"We need to have several thoughts in mind at the same time, then."

Last week, he delivered the Karl Brunner lecture at the Swiss National Bank. His starting point was the risk to monetary independence in a situation where interest rates are higher than growth rates, causing public debt burdens to keep growing unless governments undertake unrealistically harsh savings efforts. That creates incentives for “fiscal dominance”, where governments pressure central banks to inflate away the debt.

We know, it's completely fuuuuuucked. YEEES, financial repression will be wonderful

"The solution, of course, involves reversing the “r greater than g” predicament, so that debt dynamics are self-improving with less demand for austerity"

Weeeirdooo

A little bit of a central banking/Nobel Prize aside: #1594162, #1595072

Woodford, in particular, has emphasised the powerful effect of central bank communication. In the sort of models he built, committing to certain policies later — he was a father of “forward guidance” — can improve on the economic outcomes achievable from choosing the best policy at every point in time. His 2005 paper explains this in the case of liquidity traps (where central banks cannot or will not lower rates below zero), where a credible commitment to inflating the economy for some time in the future stimulates growth today.

"forward guidance took a hit in 2022 when central bankers found it impossible to stick to a commitment to keep rates lower for longer in the face of high inflation."

...of their own making, dude forgot to add.

(Woodford foresaw this in 2005: “Policymakers . . . would be right to anticipate . . . that they subsequently will find the commitment an annoying constraint.”) And the chair of the Federal Reserve has explicitly disavowed it. Yet perhaps Woodford’s prize and Draghi’s intervention are straws in the wind that show it is possible to react with too much determination against present price pressures, at the cost of unnecessarily slow growth in the medium term.

So much for neutral, watchmaker technocratically doing just what's good and correct and necessary...

Collateral policies already in effect do direct capital, and can be tweaked. More consciously, differential central bank lending rates can be introduced to back different kinds of credit practices by banks. Before the tightening of monetary policy in 2022, both the Bank of England and the ECB had offered loans to banks on terms below the policy rate, to the extent they expanded credit in specified ways, for example. Such policies could be reintroduced, including when policy rates need to be high.

archive... going to shit: https://archive.md/https://www.ft.com/content/825b0ed4-060e-49dd-8199-b6accc393ff1