Central banking and you, in two sentences
Interfluidity. The wind up:
I have my own normative view of "the great moderation" [see here] and it is not positive.... First, in exchange for apparent stability, the central-bank-backstopped "great moderation" has rendered asset prices unreliable as guides to real investment. I think the United States has made terrible aggregate investment decisions over the last 30 years, and will continue to do so as long as a "ride the bubble then hide in banks" strategy pays off. ... Second, by relying on credit rather than wages to fund middle-class consumption, the moderation dynamic causes great harm in the form of stress from unwanted financial risk, loss of freedom to pursue nonremunerative activities, and unnecessary catastrophes for isolated families. Finally, maintaining the dynamic requires active use of policy instruments to sustain an inequitable distribution of wealth and income in a manner that I view as unjust.
And, in two sentences, the pitch:
In "good times", central bankers actively suppress the median wage (while applauding increases in the mean wages driven by the upper tail). During the reset phase, policymakers bail out creditors.
Sure feels like that to me, looking back at the last 30 years.
And now, the follow through.
There is nothing "natural" or "efficient" about these choices.
Great blog. I love the econoblogs. It's too bad "progressives" hardly ever link to them.