Sep 14, 2016 – from Social Intelligence

The End of Monetary Policy?

Arrow sloping downwardIn a telling indictment of central bank strategy, sales of safes are skyrocketing in Japan and parts of Europe, two regions that have rolled out negative interest rate policies (NIRPs). Rather than spurring consumer spending, evidence suggests that prolonged low interest rates actually drive consumers to save—whether because of pure economic pessimism or because they must put away more cash to meet their retirement targets. With few monetary tricks left at their disposal, central banks may have to use radical tools, including large fiscal deficits and “helicopter money,” if they want to bring slow-growing economies up to speed.

Over the past few years, central banks have had trouble jumpstarting laggard economies. As we’ve written before (see: “The Global Economy Gears Down”), advanced economies are experiencing stagnant real growth, while many emerging markets are undergoing a full-scale slowdown.

In order to incentivize consumers and businesses to spend, central banks have slashed interest rates. In the wake of the Great Recession, the U.S. Federal Reserve cut its benchmark rate to 0.25…

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