TITLE:
A Glance on the Monetary Politics from the Sustainability Perspective
AUTHORS:
Giovanni Antonio Cossiga
KEYWORDS:
Monetary Policy, Problematic Inflation, Central Banks, Speculation, Different Waves of Inflation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.6,
December
7,
2023
ABSTRACT: A difficult moment for wide-ranging monetary policy, hit by the
accusation of having caused the looming global recession with the rise in
rates. But is it really like that? That is, would a more accommodating monetary
policy have saved the economy to all? Probably a poorly posed question, because
it is difficult to agree with those who want to blame the policies of the main
banks for an economy that is taking a turn for the worse. Meanwhile, it must be
underlined that international price inflation cannot be cured by manipulating
interest rates. Yet, the main central banks have ridden (on average) for ten
consecutive small jumps. How can we now explain the interest rate shock to the
real economy if they have almost no effect on inflation due to rising international
prices? As if to say that the choice was to cut rising prices through the
invoked recession. But this hypothesis also does not seem to hold up because
the increase in interest rates does not cut inflation only because of an
expected recession. Yet, if central banks around the world insist on this
growing tone, they must have their good reasons. We certainly find a good
reason, but it has nothing to do with international price inflation. In fact,
the decision to repeatedly increase interest rates, which were hovering around
zero was sacrosanct. It has finally put a stop to cheap credit, which in turn
encourages speculation on the prices of oil and rare metals. The rhythmic
increase in rates when stock market pressure has dropped is obviously less clear.
The answer seems to be that the Central Banks do not change their model after
the victory over inflation achieved by Volcker’s FED, which increased rates
beyond the inflation rate at the beginning of the 1980s. With the exceptional
result of bringing inflation under control and a record economic situation in
the USA. But those were various times and another standard of inflation.