commentary by Roger Erickson
Does Central Bank Independence Frustrate the Optimal Fiscal-Monetary Policy Mix in a Liquidity Trap?
While it's a very useful discussion, these guys are either being diplomatically over-cautious, or can't see the options for the fees. Answer sure seems to be "all the time," not just in certain situations. Central bank "independence" or "dependence" are just euphemisms for public-institution coordination. Select whichever method works better - but at least do it quickly? And keep changing it, as often as situations require? What happened to American ingenuity?
The deeper issue is that everyone isn't setting their sights 10x higher, and then openly discussing leanest/fastest/best ways to get there. Every process is too important to be left to the presumed process owners! That's what evolution means, for Pete's sake!
Have More Options Than We Can Imagine. ... Won't Explore Them.
[That's a helluva calling card. Don't expect the future to hire us unless we change what we broadcast about ourselves, and what we practice.]
Even the minority arguing for recognition of a liquidity trap don't see the simultaneous Fraud Trap. And, many of the people seeing the Fraud Trap don't even grasp what a liquidity trap is.
In any given situation, there are always multiple, simultaneous traps facing a culture with many degrees of freedom! If we don't maintain a citizenry - or at least a minimum set of leaders - capable of efficiently AND QUICKLY discussing situations from that perspective ... we're doomed? We already know that success tracks the quality of distributed decision-making. Yet we won't openly acknowledge and set about optimizing that metric! Not openly exploring unimaginable options and organization traps - with agility - is our greatest known trap? Let's name that, and call it by two names. An Adaptive Rate Trap, and an OBT&E trap.
"Leaders" are the emergency fallback for an incompetent electorate? Gods help us!