On Mon, Aug 12, 2013 at 8:25 AM, Anthony D'Costa <[email protected]>wrote:
> > http://in.reuters.com/article/2013/08/06/breakingviews-india-rajan-idINDEE9750D320130806 > Quoting from the Reuters piece: > In retrospect, the 2005 speech might be Rajan's greatest hour of glory. He > gave it at a global central bankers' conference celebrating the career of > Alan Greenspan, a high priest of financial deregulation. Rajan was a > party-pooper. He warned that securitisation had made the financial system > more vulnerable, not safer. He questioned whether banks had sufficient > liquidity to cope "if the tail risk does materialise." > Unfortunately the 2005 speech might be indeed turn out to be Rajan's greatest hour of glory. His analysis has been downhill ever since. Recently Rajan has been making Austerian arguments based on what seems like a instinctive dislike of easy-money policies. I am not sure he is a good choice for any central banking position. http://www.project-syndicate.org/commentary/money-magic --------------snip More than any other policy action, monetary policy suffers from the sense that there is a free lunch to be had. Yet the interest rate is a price for the savings that are transferred to spenders. To the extent that the Fed manages to push this price down (and some economists will dispute its ability to push any meaningful interest rate down), it taxes the producers of savings and subsidizes the spenders of savings. Clearly, no government considers pushing down the price of any real good an effective way to stimulate the economy – any gain to consumers is a loss to producers, and the loss typically will outweigh the gain if the market price is a fair one. So why are savings different? -raghu.
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