Wait until you hear about the ultimate fraud...Economists.
Look at the EU central bank and their rising on interest rates despite rising prices not proving rising demand....but they live by their model...
You get a war as external shock that makes oil scarcer while the economy is already contracting...so they hike rates, what will not create oil but crushes demand on top of a supply collapse...
Yes, that is how it works. To make supply and demand meet, you can increase supply or decrease demand. Central banks only have one of those levers and have to use it to counteract whatever the market does to the other lever.
Most of the time economists are just making up excuses for why it's actually a good thing to give all the world's money to rich people who happen to employ economists, but sometimes there's a spark of truth.
Economics is always political, and economists advice reflects that. Other fields can be political, economics remains largely "political economy" with a pretence at neutrality.
Its not the ECB - many central banks are doing the same for the same reasons.
I was in a pretty decent econ program big public university. The program and our professors at the time had close Wall Street ties due to proximity. Despite that, no professor took themselves very seriously and many would make constant cracks about the absurdity of the field and why would anyone listen to them. It was a totally cool department of self-aware smart people.
Central bank interest rates don't exist to 'control prices' per se. The state would like to create new money supply to make the economy move faster (e.g. maintain high employment in slow business periods). This would be to the disadvantage of the banks (their loans to debtors would be devalued). Hence a compromise was created to make the money supply more elastic without risking hyperinflation - banks may create new money supply for this purpose but must pay for it at the interest rate. Inflation is key a part of the feedback loop, to limit money creation to some supposedly optimal target range.
Surprisingly, this system was created by bankers and politicians, rather than economists /s
There are also many sources of 'cost of living' which are not related to money supply and therefore not directly related to monetary policy.
Imagine an island country that produces no oil, a totally realistic scenario.... War cuts supply and oil goes from €10 to €100. Economy contracts, prices rise.
What do Economists do?: Raise interest rates!
Excellent. How many barrels of oil did that create? Zero.
It takes a remarkable level of abstraction to look at a physical shortage and conclude that the real problem is that people still have too much money.
They are worst than a fraud...Economist are criminals...
Betelbuddy · · focus · HN ↗
Look at the EU central bank and their rising on interest rates despite rising prices not proving rising demand....but they live by their model...
You get a war as external shock that makes oil scarcer while the economy is already contracting...so they hike rates, what will not create oil but crushes demand on top of a supply collapse...
someonebaggy · · focus · HN ↗
Most of the time economists are just making up excuses for why it's actually a good thing to give all the world's money to rich people who happen to employ economists, but sometimes there's a spark of truth.
graemep · · focus · HN ↗
Its not the ECB - many central banks are doing the same for the same reasons.
snapetom · · focus · HN ↗
skew-aberration · · focus · HN ↗
Surprisingly, this system was created by bankers and politicians, rather than economists /s
There are also many sources of 'cost of living' which are not related to money supply and therefore not directly related to monetary policy.
otterley · · focus · HN ↗
Central banks don’t take the cause of inflation into account when they adjust borrowing rates. This is a feature, not a bug.
amelius · · focus · HN ↗
Betelbuddy · · focus · HN ↗
What do Economists do?: Raise interest rates!
Excellent. How many barrels of oil did that create? Zero.
It takes a remarkable level of abstraction to look at a physical shortage and conclude that the real problem is that people still have too much money.
They are worst than a fraud...Economist are criminals...