“Even if the textbooks were correct about the benefits of government management of the money supply, the damage from one episode of hyperinflation anywhere in the world far outweighs them”
The above mentioned quote from Saifedean Ammous arises doubts about the education career which has been followed by our financial specialist for the last century. Therefore, it arises doubts on monetary role that governments and central banks have had during the past years. Whatever is the idea behind it, Federal Reserve On Wednesday increased its reference interest rate by a quarter-percentage point to 2.25% from the previous 2%, which is the highest level since 2008. As rates continue to go up, market participants and commentators are showing no signs of fear as the stock market are recording higher highs again. Unfortunately, we don’t have positive experience, since every time Central Banks have hiked interest rate, bgr recessions have been recorded, therefore a “soft landing” after rate hike cycles are as rare as unicorns. It happened indeed that monetary policy “manipulations” have resulted in a recession, financial, or banking crisis. There is no reason to believe that this time will be any different.
If the central banks set interest rates and hold them at low levels, with the purpose of creating an economic boom after a recession, they are actually interfering with the organic functions of the economy and financial markets. This brings to serious consequences including creation of distortions and imbalances. By holding interest rates at artificially low levels, the Fed creates “false signals” that encourage the undertaking of businesses that would not be profitable or viable in a normal interest rate environment