Member-only story
A Discussion On Monetary Levers
Why access to credit rather than interest rates should be the primary tool of monetary policy.
For policy makers to minimize the human misery from economic booms and busts it’s important they have the right tools for the job. For the better part of a century interest rates have gone unchallenged as the primary monetary tool for Central Bankers and policy makers. It’s time that we put modern economic theory to the test. This critique of monetary levers reviews the validity in the faith and emphasis of interest rates as the primary monetary lever and proposes the incorporation of access to credit to create a suite of monetary tools. After all policy makers, like builders, need the right tools for job.
The Market Place
First, let’s take a moment and imagine a bustling market place, full of people buying and selling their wares, vendors calling out their sales - there’s everything from fresh fruit and vegetables to furniture and clothing available. Like many markets and businesses this marketplace has rules to enter and only the people that meet the rules or can pay the gate fee are allowed in. While it’s busy and bustling inside, the entry rules mean there’s people left on the outside, looking in, watching the traders go about their day, seeing the goods get bought and…
