Larry Summers Wants to Give You a Free Lunch

by MN Gordon
Acting Man

Consequences of Central Bank Policies

The existing capital stock continues to be frittered away at the expense of savers and retirees. Nonetheless, central bankers don’t give a doggone about it. This, after all, is one consequence of roughly eight years of near zero interest rate policy.

Another related consequence is that the pricing equilibrium of capital markets has broken down. In particular, bond yields no longer reflect a market determined price of money established by the economy’s demand for credit. Hence, previously unfathomable interest rate movements are now happening with unwavering regularity.

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